No Priors Ep. 136 | Base Power CEO and Co-Founder Zach Dell

1. 0:00 – 0:50

   Zach Dell Introduction

   1. EGElad Gil0:00

      (instrumental music plays) Today on No Priors, I'm joined by Zach Dell, the founder and CEO of Base Power. Base just announced a one-billion dollar fundraise from folks like Addition, Thrive, Andreessen Horowitz, Lightspeed, Altimeter, Valor, and myself. Zach previously was at Blackstone, working in different private equity, and Thrive doing investments in various AI and software companies. Uh, very excited to talk to him today about not only his company, but also more broadly about the energy industry and how energy is an input into literally everything that we do and consume. That's AI data centers, that's the pencil you're using to write, that's your computer, that's mining, that's basically everything in the world. Energy is a major input. So, very excited to talk with Zach today. Zach, thank you so much for joining me today on No Priors.

   2. ZDZach Dell0:49

      Thanks for having me.

2. 0:50 – 2:15

   Base Power’s Vision

   1. ZDZach Dell0:50

   2. EGElad Gil0:50

      Energy is an input into everything in the world that's produced, right? It drives data centers, it drives electric cars, but it also drives all of manufacturing. It drives the internet. It drives basically every aspect of our lives, and it's a key cost input into everything. So if you have very cheap energy, everything else becomes dramatically cheaper, and that opens up entirely new spheres. You've been working on Base Energy, b- excuse me, Base Power for a couple years now. Can you tell me more about how you landed on what you're doing and what Base actually does?

   3. ZDZach Dell1:16

      Yeah. Our mission is to lower the cost of electricity for all, and we think that is the most powerful thing we can do to promote human prosperity, so to create a world of energy abundance where power is less expensive and more reliable. So, I got here by way of, of finance world. So I started my career at Blackstone. I was on the private equity team there. I spent a couple years at Thrive Capital, investing in technology companies, and then left Thrive ultimately to start the company with my co-founder, Justin. And I think at those firms, I was able to see a lot of the industry, the value chain of, of energy, of different kinds of technologies like solar and storage and see this kind of paradigm shift unfolding, where if you look at the last five decades of energy, it's really been defined by coal and then natural gas. And it, it seems pretty clear now that based on where the cost curves are going, the next five decades of energy are gonna be def- defined by solar and storage, and there's really no energy technology platform company built around that thesis. And so that is really the, the, the kind of vision, the idea, uh, around which we started the company, uh, a couple

3. 2:15 – 4:00

   Base Power’s Products and Services

   1. ZDZach Dell2:15

      years ago.

   2. EGElad Gil2:15

      Okay. And you just closed literally a billion dollars in new financing, which I think brings your total over time to 1.3 billion. What is that money gonna go to? What products do you provide? What services? Like what, what are you currently doing?

   3. ZDZach Dell2:25

      Yeah. So the capital really is going to accelerate our vertical integration, which allows us to ultimately lower cost for consumers. So our strategy at the highest level is to develop a compounding cost advantage through vertical integration. So we design batteries, we make them, like literally manufacture them, we install them, own them, operate them, and we sell power directly to, uh, homeowners. So to answer your second question specifically, when you sign up with Base, we become your electricity provider. So today, we're only available in Texas, where now we, we sell power to deregulated customers who can choose their electricity provider, and then we do sell our technology to the regulated utilities in Texas, and then they offer our services to their customers. So when you sign up with Base, we install our battery on your home. When the grid's up and running, we use that battery to serve the grid. When the grid goes down, you get that battery to back up your home, and we're able to save our customers on the order of 10 to 20% a month on their electricity. So as we invest further, as we build new generations of the technology, our costs will go down, our returns will go up, we'll be able to share those returns, so to speak, with the customer in the form of lower and lower prices, driving the price of, of the electron down, driving the availability or the reliability of the electron up, which is really our mission.

   4. EGElad Gil3:31

      Mm-hmm. And so you basically have these batteries you install in people's homes. It's, uh, sort of smart batteries so it can interact with other batteries across a network, and it basically responds to different power availability and fluctuations and allows you to then make money off of that-

   5. ZDZach Dell3:44

      Exactly.

   6. EGElad Gil3:45

      ... plus your customer saving.

   7. ZDZach Dell3:45

      Yeah. Another way to think about it is we're building the world's largest distributed power plant, right? So we install these energy assets all over the grid, and we use software to connect them effectively and bid them into the market intelligently, and we use all of the income that we generate from that to drive down costs for our customers.

4. 4:00 – 5:12

   What Drew Zach to Working on Power

   1. ZDZach Dell4:00

   2. EGElad Gil4:00

      How'd you decide to work on this problem in particular? Like, you had a great vantage point working at Blackstone in private equity, which is a generalist team, at Thrive, who've done investments in companies like OpenAI and Stripe and others, and so you've seen like a, a wide swath of the world between those experiences. What honed you in on energy in this particular...

   3. ZDZach Dell4:15

      Yeah. It's a great question. I, I mean, I, I first got really fascinated with energy in college, and I actually worked on a project, uh, in the energy space there and actually, you know, worked on a number of projects. One in particular was to develop a solar farm and-

   4. EGElad Gil4:25

      Mm-hmm.

   5. ZDZach Dell4:25

      ... uh, put panels on the ground and sell the power back to the local utility and do it in this very kind of financially engineering-oriented way.

   6. EGElad Gil4:30

      Mm-hmm.

   7. ZDZach Dell4:31

      And so I'd been studying the energy value chain, so to speak, from a finance perspective-

   8. EGElad Gil4:34

      Mm-hmm.

   9. ZDZach Dell4:35

      ... for a long time, and then I think at Thrive, I was exposed to this pattern match of companies that were going after big, incumbent-dominated industries where the leader in the space was not technology-focused, engineering-led, or R&D-driven. And it happened in autos with Tesla, it happened in aerospace with SpaceX, it happened in defense with Anduril, and it wasn't being done in energy.

   10. EGElad Gil4:54

       Mm-hmm.

   11. ZDZach Dell4:55

       And turns out, energy is the biggest industry of, of all of those and it's the most important. And so I was really inspired to go build that modern power company of the electric era, engineering-led, technology-focused, R&D-driven in what I think is the largest and most interesting category in the economy.

   12. EGElad Gil5:11

       Mm-hmm.

5. 5:12 – 6:58

   Base Power’s Founding Team

   1. EGElad Gil5:12

      And as part of that, you had to build a very multidisciplinary team. You have people working on hardware, you have people working on mechanical engineering, on software, on a variety of things. What was the founding team like and how big are you now? What sorts of people?

   2. ZDZach Dell5:25

      Yeah. It's, uh... This business is, is a complex coordination problem. We have to be a lot, good at a lot of things at the same time. And so the, you know, the, the way to buy down execution risks, so to speak, is to build a world-class team of people across a bunch of different domains. So my, you know, if you look at myself and my co-founder, we have very different skill sets, right? Justin is very operational, technical. He led manufacturing at SpaceX. He led manufacturing at Anduril. You know, our first hire, Jared Green, our head of software, led the laser topology team at Starlink, so the team that built the mesh that connects all the satellites in space. Not only is he a world-class software engineer, but he understands fir- firmware and mechanical engineering and power electronics. And our next couple of hires, you know, Cole Jones, our head of growth, who ran go-to-market at Starlink, Dana Paz, our head of deployments, who led manufacturing engineering at Anduril, and some other early team members who, you know, Suzanne Deng, who ran procurement at SpaceX for ten years, our head of supply chain, Andy Ross, our head of manufacturing, who led Model 3 battery manufacturing at Tesla, Dino Sossarides, our head of hardware, who led...... Powerwall engineering at Tesla and, uh, worked on the design of the Powerwall 3. So, we've been able to pull together an incredible group of people with domain expertise across all of these different functions. And I think one of the really special things is that if you think about those five, six leaders at the company, like, all of them were part of our first 10 hires.

   3. EGElad Gil6:34

      Mm-hmm.

   4. ZDZach Dell6:35

      Right? And so, as we went from 10 to now 250 people, to answer your other question, the culture of the company is really defined by those core leaders. And those people who are now leading teams, they were once the IC. They were doing all the IC work, and now those leaders are still doing IC work. I still do IC work every day.

   5. EGElad Gil6:50

      Yeah.

   6. ZDZach Dell6:50

      So does Justin, as you know. And so, it's a big part of our culture to kind of lead from the front. And we were able to pull together a really incredible team, which is

   7. SGSarah Guo6:56

      Yeah.

   8. ZDZach Dell6:56

      ... so full of ...

   9. EGElad Gil6:57

      It sounds like a amazing mix. Are,

6. 6:58 – 8:02

   Base Power’s Hiring Needs

   1. EGElad Gil6:58

      are there specific areas that you're hiring for right now or looking for key talent in?

   2. ZDZach Dell7:01

      Yeah. So, as part of our announcement, kind of the big theme here is join the charge, right? It's a call to action to the most talented engineers, operators, and creatives in the world to come join us on what we think is the most interesting, exciting, and important mission out there in technology right now. And so, we're really hiring across all teams; software, hardware, finance, go-to-market, business development, regulatory policy, uh, deployments engineering, manufacturing engineering. You know, specifically some areas where we're really focused right now are firmware, power electronics, um, mechanical engineering, you know, design engineering, uh, so- a- all kinds of software engineering, basically. Everything from, you know, very low-level firmware to, you know, front-end, to back-end, and cloud engineering, and everything in between. So, um, you know, right, right now, the, as you, as you noted, you know, we've, we've raised, uh, you know, 1.3 billion in the last 18 or so months. We've got more demand than we can serve. We're standing up our first factory in Austin to produce our product at, at really large scale. And really, the constraint is great talent. Um, and so, you know, we wanna put the word out there-

   3. EGElad Gil7:57

      Yeah.

   4. ZDZach Dell7:57

      ... that we're open for business and we, we wanna bring, uh, more great people down to Austin to join our team.

7. 8:02 – 9:51

   How Zach Hired an Awesome Founding Team

   1. ZDZach Dell8:02

   2. EGElad Gil8:02

      How did you inspire such, um, heavyweights to join you to act as ICs early on? Because often, I think founders struggle with both, what's the seniority of people to hire, as well as how to convince somebody who's actually led a major part of SpaceX or Anduril or one of these core companies that are, you know, still growing like crazy themselves.

   3. ZDZach Dell8:19

      Yeah.

   4. EGElad Gil8:19

      How do you convince people like that to join you so early?

   5. ZDZach Dell8:21

      I think it's pretty obvious that the best people wanna work on the hardest problems-

   6. EGElad Gil8:24

      Mm-hmm.

   7. ZDZach Dell8:24

      ... and the biggest, most important missions, right? Like, very capable people want an opportunity to put a dent in the universe. And what we are going after impacts the whole planet. It impacts industry, it impacts homeowners. It's very visceral. People think about, you know, "Well, my power bill's been going up ev- you know, every year the last 10 years, and my power outage are b- becoming more frequent than they've ever been. Like, this is a problem that actually needs solving." Um, and then look, I, I think the best people r- really largely, or, or most people are looking for three things. One is they wanna do, they wanna have fun at work. They wanna do interesting work. They wanna work with smart people that are nice to be around. They wanna be pushed. They wanna be challenged. Number two is, uh, just a massive kind of never-ending list of hard problems. I think you see at companies, you know, hire a bunch of re- really great people, come up with a, a bunch of really awesome things, and then over time, they kind of struggle to retain the top talent as the problems become less and less interesting. If you peak under the hood at Base, which you have, uh, you know, with the best of them, you'll see that the list of hard problems to solve is really mind-blowing. Um, and we kind of unlock the ability to solve new problems as we enter new markets and release new products, and, uh, the energy space is big and it's complicated and it's hairy.

   8. EGElad Gil9:33

      Yeah.

   9. ZDZach Dell9:33

      So, there's a massive bucket of hard problem to solve. And then, look, I think the third is economic upside, right? You know, we're going after what we think can be one of the largest, y- you know, opportunities in the economy, one of the biggest companies in the world. And, you know, if, if we're successful, you know, it's gonna, it's gonna be very big. And so, there's a really exciting upside case there, uh, for top talent.

   10. EGElad Gil9:50

       So,

8. 9:51 – 12:58

   How Do We Meet Energy Demands?

   1. EGElad Gil9:51

      as we were discussing earlier, energy is one of the most important markets for humanity, or most important industries, because it drives everything else. And it drives the cost of everything from AI, to the car you're driving, to the pencil that you use (laughs) to write-

   2. ZDZach Dell10:03

      Yep.

   3. EGElad Gil10:03

      ... et cetera, because an input into everything. You know, projections that we were discussing earlier said that the demand for energy may be going from a 2% compounded annual growth rate a year to closer to 10%. And so the question is, how do we actually fill the supply side of that? Where does all this new production come from to make sure that those needs are met?

   4. ZDZach Dell10:22

      Yeah.

   5. EGElad Gil10:22

      Um, A, do you think those projections are correct? And B, how do you think about how we solve for that?

   6. ZDZach Dell10:26

      I do think directionally the demand projections are correct. And I, and I think that ... Or, or actually, uh, they're potentially understated. Uh, I think there's a massive amount of electricity demanded coming. Uh, now, how do we serve it is the question? You'll hear people talk all the time about, "Oh, we're running outta energy. We have no energy." That's not really true. We're not using the energy that we have in the most effective way possible.

   7. EGElad Gil10:45

      Mm-hmm.

   8. ZDZach Dell10:46

      Uh, and, you know, another way to think about it is, you know, the US grid kind of max peak is somewhere on the order of 700 gigawatts, but average, average demand a- across the country is closer to like 300 gigawatts, right? So, we've got another 300, 400 gigawatts, uh, you know, up to s- up to 700 gigawatts if you believe that, you know, that peak is gonna grow to a terawatt of latent capacity. And, you know, the way to access that capacity is by time-shifting electricity, right? Using batteries and software. And so, you know, we think that our technology layer is gonna unlock a bunch of latent capacity on the grid, help us meet that demand, but we will also have to build more generation, right? And there's tons of smart people and interesting companies that are working on-

   9. EGElad Gil11:22

      What do you think are the most promising aspects of generation?

   10. ZDZach Dell11:25

       So-... uh, I mean, I think we've seen a lot of this progress happen in solar, right? The solar cost curves have been, uh, uh, you know, aggressive, to say the least, and they, they've played out, right? And now the cost of-

   11. EGElad Gil11:33

       Have those largely been driven by Chinese subsidies? Because I know the Chinese government subsidized a lot of very early solar production.

   12. ZDZach Dell11:39

       It's been s- it's been driven by capex.

   13. EGElad Gil11:40

       And then the demand curve takes over, yeah?

   14. ZDZach Dell11:41

       Yeah, it's been driven by capex. A lot-

   15. EGElad Gil11:42

       Yeah.

   16. ZDZach Dell11:42

       ... of the capex has been subsidized by the Chinese government and through Chinese companies. A lot of capex has come from US companies and companies in Europe. And so, uh, it's been driven by capex. I think, you know, solar will continue to get cheaper to deploy. Batteries will continue to get cheaper to deploy. Um-

   17. EGElad Gil11:55

       And s- and I think, uh, Texas is now the biggest deployer of solar, is that correct?

   18. ZDZach Dell11:58

       Solar and wind.

   19. EGElad Gil11:59

       And wind. And, um, it's interesting 'cause I was looking at these cost curves or projections, and it looks like solar is now a couple years ahead of where people thought it was from a deployment perspective. D- do you know what percentage of the US market is now solar, in terms of actual energy production?

   20. ZDZach Dell12:12

       Um, it varies a lot by state. Texas is about 20% right now in the fuel mix, um, and it's on the higher end. Uh, I think California's is higher, closer to 30, and you have states like New Mexico, Nevada, Utah, Arizona that are, that are up in that range. And then, I mean, it, it's funny-

   21. EGElad Gil12:25

       I think you pointed out, so that... Sorry, go ahead.

   22. ZDZach Dell12:27

       Well, if you look at the map of the US and you map solar penetration as a percentage of, of fuel mix, it pretty closely maps, like, where the sun is, right? (laughs)

   23. EGElad Gil12:34

       Yeah. (laughs) Yeah. Makes sense, yeah.

   24. ZDZach Dell12:34

       So like, you have a ton of solar in the Sunbelt, and you don't have a ton of solar in parts of the country where sun is less prevalent. Now, as the cost to land solar and storage on the grid goes down, I think you'll, we'll kind of turn on, so to speak, other geographies where solar used to not make sense and now it does make sense. But there's tons of investment going into other forms of generation. Nuclear obviously has been a topic of conversation, uh, across the country, and I think there's a lot of great work happening there. But right now, it's too expensive.

9. 12:58 – 17:04

   How Viable is Nuclear Energy?

   1. ZDZach Dell12:58

   2. EGElad Gil12:58

      Do you think it will credibly take off? Because, you know, I looked into the cost structure for nuclear before, and there was two or three drivers. Uh, one is honestly just environmental delays and the cost of debt as you get delayed. And so, you have these big project financing things that you raise money for. And then, if you're delayed a couple years, the costs go up so dramatically that it makes it an uneconomical project. And because people are so used to these delays, they always build giant projects-

   3. ZDZach Dell13:21

      Yeah.

   4. EGElad Gil13:21

      ... 'cause we're like, "If we're gonna take the hit-"

   5. ZDZach Dell13:22

      Right.

   6. EGElad Gil13:22

      "... we may as well take the big, the hit big." People are now moving towards these smaller, more modular reactor systems. Do you think that will actually credibly take off? 'Cause solar was never an issue of safety. I mean, excuse me, nuclear was never an issue of safety. It was never an issue of some aspects of cost. I mean, again, it was, it was almost like these imposed delays through environmental lobby or nimbyism or other things that often seem manufactured. But do you think it's kind of dead in the water going forward? Or do you think it's, uh-

   7. ZDZach Dell13:45

      I don't think it's dead in the water. I, I hope it takes off. I think it has to get a lot cheaper and it has to get a lot faster. My opinion is that the rate of solar deployment will go up so fast as the costs continue to go down that it, it might just not matter, that we'll have so, it'll be so easy and low cost to deploy solar and storage that, uh, the economics of building nuclear reactors just won't make sense.

   8. EGElad Gil14:03

      And is storage really the core component of it?

   9. ZDZach Dell14:05

      Yeah. Because, I mean, you have to, you know, the sun is only shining so many hours of the day-

   10. EGElad Gil14:09

       Yeah.

   11. ZDZach Dell14:09

       ... right? So you need, uh, you need sol- storage to, to-

   12. EGElad Gil14:12

       And that's because-

   13. ZDZach Dell14:12

       ... to kind of firm up that solar-

   14. EGElad Gil14:12

       ... you can't really transmit, like, long distances on the grid, right? And so I think that's the issue, yeah.

   15. ZDZach Dell14:16

       Well, you can, but there's transmission costs, right?

   16. EGElad Gil14:18

       Yeah.

   17. ZDZach Dell14:18

       And so it's what, uh, the, the, what matters is the landed cost of the electron, right? And so solar and storage is the way that you get that landed cost down. Uh, and I hope that we're able to come up with breakthroughs in nuclear to drive down the landed cost of a nuclear-generated electron. But right now, we're not, uh, in a world where it's really competitive with solar. But, you know, at, at base, like, we are fans of all kinds of energy generation, right? We're really more competitive, so to speak, with poles and wires than we are with, uh, solar, wind, nuclear, geothermal, hydroelectric, et cetera. Batteries move energy through time, right?

   18. EGElad Gil14:46

       Mm-hmm.

   19. ZDZach Dell14:46

       Poles and wires move energy through space. If you're generating all your electrons via a nuclear reactor, you still need to move that power, right? Because unless you have reactors everywhere in everyone's backyard, which, you know, I don't think is all that likely, you have to have a lot of these reactors everywhere.

   20. EGElad Gil14:59

       Yeah.

   21. ZDZach Dell14:59

       You need to move the power. You have to match up the generation of the power with the, you know, the supply with the demand, right? And so, we think having storage demand side really helps you smooth that curve out.

   22. EGElad Gil15:07

       So you're basically really moving from a centralized grid to a distributed grid.

   23. ZDZach Dell15:10

       Correct.

   24. EGElad Gil15:10

       And that's the core insight of what you all are doing.

   25. ZDZach Dell15:13

       Correct.

   26. EGElad Gil15:13

       And to your point, solar is the best way to create that at core insight for energy generation in general.

   27. ZDZach Dell15:18

       That's right, yeah. And you'll see us over time come out with new products that are distributed in manner, technology defined, that help us lower the cost of and, and increase the reliability-

   28. EGElad Gil15:27

       Yeah.

   29. ZDZach Dell15:27

       ... of energy.

   30. EGElad Gil15:27

       If you look at a lot of the, um, things that people talk about as things that open up with, um, lower energy or open up entirely new markets, I mean, one is just AI and data centers. With these massive buildouts, we're gonna need energy for them.
10. 17:04 – 17:41

    Global Energy Cost Dynamics

    1. ZDZach Dell17:04

       places, but not entirely.

    2. EGElad Gil17:04

       What do you view as the low-cost electricity places of the globe today?

    3. ZDZach Dell17:07

       (laughs) Right now, unfortunately, it's China. And we gotta make the United States-

    4. EGElad Gil17:10

       And is that because of solar? Is that because of nuclear? Or is that anything else?

    5. ZDZach Dell17:12

       It's, it's supply and demand. It's because they've built out a massive amount of supply. And it's all of the above, right? They built, they built nuclear reactors. They built solar farms. They built wind farms. They built a ton of battery storage. They have, you know, tons of high-voltage transmission. And so, our, my, our hope and, and really what we're working on, is kind of stimulating this, this build out in the US. I think Texas will be a low-cost place to build energy technology, b- build all technology, due to the cost of energy. And I think other parts of the country will pop up as energy hubs, uh, as different states and policymakers and regulators really embrace that.

    6. EGElad Gil17:39

       Mm-hmm. Okay. And

11. 17:41 – 18:32

    Future of AI Training Centers

    1. EGElad Gil17:41

       then, one thing that I've heard, um, some people talking about increasingly is if you look at the cost of energy and then you look at the overlay regulation, especially relative to AI, it suggests that a lot of the big, at least, training center build-outs where you take a bunch of data and you train a new model on it are gonna basically happen in the US and the Gulf.They're not gonna happen in Europe because of rising energy costs as well as because of, um, some of the extra regulations. It's not gonna happen in parts of Asia because of security or other concerns. Do you think that's a correct view of the future in terms of most AI training is just gonna be in two parts of the world, and they're gonna be effectively a US domain?

    2. ZDZach Dell18:15

       I think the highly energy-intense workloads will converge around the low-cost electricity-

    3. EGElad Gil18:20

       Mm-hmm.

    4. ZDZach Dell18:20

       ... places. You'll see a lot of that go to the Gulf. You'll see a lot of that go to Texas. And you're seeing that now, right, with Stargate and Abilene, uh, and all the big projects that have been announced in the Gulf. So, I- I- I do think that that is likely to continue playing out in that way.

    5. EGElad Gil18:31

       Yeah.

12. 18:32 – 20:38

    What Will Drive Energy Buildout

    1. EGElad Gil18:32

       And then what do you think are the biggest drivers of future energy adoption from a technology perspective? And then I'd love to get your perspective from a regulatory perspective.

    2. ZDZach Dell18:40

       Um, you mean what will drive more buildout of energy technology?

    3. EGElad Gil18:43

       Correct. Like, what's lacking today, or what technology is most promising, or where do you think are the most interesting shifts happening from a

    4. ZDZach Dell18:47

       Yeah, I mean-

    5. EGElad Gil18:48

       ... technology

    6. ZDZach Dell18:49

       Yeah. Talk to my book a little bit.

    7. EGElad Gil18:50

       ... as long as you're talking about it. Yeah. Yeah. (laughs)

    8. ZDZach Dell18:51

       I think, I think batteries are, are the key. Batteries are the unlock to the energy transition and will continue to drive out cost, uh, both the hard costs and the soft costs, right? I mean, you have the cells and the modules and the power electronics and, uh, the bus bars and the current collectors and all the things that go into a battery. But then you have the EPC cost, you know, getting the battery in the ground, logistics, the transportation, uh, all the software that goes on top of it, um, monetizing these assets, and there's costs to attack in all-

    9. EGElad Gil19:15

       Yeah.

    10. ZDZach Dell19:15

        ... parts of the stack. Um-

    11. EGElad Gil19:17

        Mm-hmm.

    12. ZDZach Dell19:17

        And so I think that, um, battery storage will be, uh, will define the next chapter of the energy transition. And I'm, I'm super hopeful that new kinds of generation will break through as super economic, and I, I hope that breakthroughs happen in nuclear and, you know, there's some interesting companies working on geothermal and hydroelectric, and I think that has a lot of promise. But, you know, as we discussed, energy is a geographically divided problem in, in the, you know, parts of the Pacific Norwe- Northwest. And in Canada where there's tons of hydro, it makes a ton of sense to, to use that as a generation type. In, you know, in Texas, you don't have a lot of that, but you do have-

    13. EGElad Gil19:46

        Yeah.

    14. ZDZach Dell19:46

        ... a bunch of wind and a bunch of solar. And so I think it'll look a little different in different parts of the world. But really, uh, you know, a- another way to think about this is, like, look at the cost of an electron, right? Basically, anywhere across the country, the cot- is really made up of two components. One is the cost to make the electron, and the second is the cost to move the electron.

    15. EGElad Gil20:02

        Uh-huh.

    16. ZDZach Dell20:02

        The cost to make the electron has gone down really significantly over the last 20 years, largely driven by the buildout of solar. But the cost to move the electron has gone up very significantly because our infrastructure's aging and utilities have this kind of perverse incentive structure to build instead of innovate. And so costs are going up. W- you know, the generation technology, solar, wind, nuclear, hydro, geothermal, they're really attacking the cost to make it. We're really attacking the cost to move it. This one's going down already. This one is going up. So I think most of the opportunity is to, uh, to innovate and to drive out costs, which really all that matters in the commodity industry, which energy is, is, uh, you know, opportunities around transmission, distribution of power and driving those costs down.

13. 20:38 – 22:30

    Drivers of Energy Transmission Cost

    1. ZDZach Dell20:38

    2. EGElad Gil20:38

       Could you talk more about the incentives that exist for utilities and why, uh, the costs of transmission are actually going up versus down?

    3. ZDZach Dell20:45

       Yeah. Um, utilities are, are regulated monopolies. Uh, and the way that the regulated entities work is that they earn a, a rate of return, a predefined rate of return on the CapEx that they invest in

    4. EGElad Gil20:55

       And that's set through some regulation, right?

    5. ZDZach Dell20:57

       Yes.

    6. EGElad Gil20:57

       They can't exceed ...

    7. ZDZach Dell20:57

       By the Public Utility Commission-

    8. EGElad Gil20:58

       Yeah.

    9. ZDZach Dell20:59

       ... typically, uh, in, in, in, in the given state. And so, and this is kind of all governed by, uh, FERC, the Federal Energy Regulatory Commission, outside of Texas, which is not governed by FERC. So there's some complexity here.

    10. EGElad Gil21:08

        What, what is the reasoning behind regulating the rate of return that a utility can have? Like, why don't they want it to be higher?

    11. ZDZach Dell21:14

        Well, they, they do want it to be higher, and they often argue that it, it should be higher. I mean, there's a b- a big history lesson here, which is kind of how the grid was built out in the early 1900s and then World War II. And the Feds basically asked all the, the grids, the Eastern Interconnect and the Western Interconnect in Texas to, to connect. And, and Texas basically said, "No, we're gonna have our own grid." And then, you know, ERCOT was born in the '70s and the late '90s or early 2000s. Bush and, and Rick Perry and, and, uh, um, some, some other cowboys in Texas basically said, "Hey, we're gonna have a competitive industry. We're gonna have a competitive market. We're gonna deregulate this thing. We're gonna invite competition. We're gonna open it up to price signals." That's why you saw so much investment in the early 2000s.

    12. EGElad Gil21:48

        So that happened in Texas specifically.

    13. ZDZach Dell21:49

        Yep.

    14. EGElad Gil21:50

        Uh, why didn't that happen in the rest of the country?

    15. ZDZach Dell21:51

        Well, it started in California actually, and then Enron happened. Uh, and that, that put an end to that pretty quickly, but Texas carried the torch.

    16. EGElad Gil21:57

        Uh-huh.

    17. ZDZach Dell21:58

        Uh, and so you had a massive buildout in sol- of solar and wind in Texas in the early 2000s. And I think that was really constructive for the industry. And, you know, will that happen in other parts of the country? You know, I, I don't know. I think there is a reason for, for regulation in, in some parts of this. And, you know, if you have neighborhoods, like, it doesn't make sense to have seven different power lines running through the neighborhood, right? It's like you should have shared infrastructure to some extent, but it's an old highly regula- I mean, it's really the only part of the economy that is still regulated in this way, right? If you look at trucking or airlines or telecom, you know, all of these industries deregulated over the last 50 years except electricity.

    18. EGElad Gil22:28

        Mm-hmm. What do you think prevented it?

14. 22:30 – 23:52

    Regulation and the Energy Industry

    1. EGElad Gil22:30

    2. ZDZach Dell22:31

       I think there's some just, like, market fundamentals that we talked about around, like, you know, don't have more than one wire going to a home kind of thing.

    3. EGElad Gil22:37

       Sure.

    4. ZDZach Dell22:37

       Partially just the difficulty of building out this infrastructure. I mean, the grid is the most complicated engineering machine ever built.

    5. EGElad Gil22:43

       Mm-hmm.

    6. ZDZach Dell22:43

       It's, it is a wild, wild system. Uh, and maintaining it and expanding it is, is really hard. And so I- I can see why it makes sense to do that in a kind of concentrated or at least, you know, regulated, centralized way. But there are other parts of the country that have some amount of retail competition in, in the North- Northeast. Um, and you are seeing some, you know, more, more innovation happen in those areas.

    7. EGElad Gil23:05

       What do you think are the regulations that are most, um, prohibitive in terms of our energy future? So if you're able to remove two or three regulations, what would they be?

    8. ZDZach Dell23:13

       Yeah. I think, uh, we gotta make it way easier to permit building energy technology. Like we need, you know, we talk about demand going up, we need more supply, right? Well, what's holding back supply? A lot of it is permitting. Just like interconnection queues need to go be, be shorter. Permits need to go faster. That, that, I think, is one of the biggest things. And then the broader point I'd make is exposure to price signals, right? Like, more competition. Um, you know, markets are reasonably efficient and giving market participants access to price signals such that they can, you know, monetize flexibility. And really what I mean by that is if you're able to move when you consume power around when power is available, you should be compensated for that, right?

    9. EGElad Gil23:47

       Mm-hmm.

    10. ZDZach Dell23:47

        And, and that's not really the way the industry works today. And I think it, it, it hopefully will move in that direction.

15. 23:52 – 24:42

    What Zach is Optimistic About in Energy

    1. ZDZach Dell23:52

    2. EGElad Gil23:52

       What, what are you most optimistic for or thinking about, uh, from a positive perspective for the energy future that's coming?

    3. ZDZach Dell23:59

       I'm a pretty optimistic guy by nature and I, I really am inspired by and believe in kinda human ingenuity. You know, for the last 50 years, the electricity industry has not been, uh, the place that the most talented engineers and operators have gone, you know, out of school or, you know, breaking into their career. It's not like I'm gonna go work in electricity, I'm gonna go work in utility. So, I have a ton of optimism that comes from this idea that the nation and our kind of really talented young people will wake up to the idea that this is an incredibly important problem and we need to send our best and brightest to go work on it. And I hope a lot of them come work at Base, but I hope other companies get started in this space to attract the best and the brightest to come solve these really hard engineering problems in the category, in, in the, in the energy space to help drive costs down and reliability up.

16. 24:42 – 27:26

    Cultivating Base Power’s Culture

    1. ZDZach Dell24:42

    2. EGElad Gil24:42

       So, I visited your office a few times now and, um, one of the things that really stood out to me is the energy that you feel as p- no pun intended (laughs) . As you sort of walk around, everybody seems very motivated, very driven, very on it, and it is kinda like a buzzy space and culture. How did you guy- d- was that purposeful? Did that just happen through the people that you hire? Like, how did you approach that?

    3. ZDZach Dell24:59

       A bit of both. I think culture largely is, is the people that you hire and those people define kind of the early culture and then you can, it's a bit of nature nurture, right? You can kind of tend to the culture and, and, and make sure it, it gets better and moves in the direction you want it. And so I'd say, you know, the things that we really value as part of our culture, you know, the first thing that comes to mind is working with urgency and focus, right? And I think it's really easy to have urgency without focus, uh, and companies often get themselves into travor- trouble by just, like, you know, y- the whole 996 thing and the, like, inten- like-

    4. EGElad Gil25:28

       Yeah.

    5. ZDZach Dell25:29

       ... yeah, we do 996. We probably do more than 996, but we don't really talk about it in that way.

    6. EGElad Gil25:32

       Uh-huh.

    7. ZDZach Dell25:32

       And it's, like, just kind of natural to how we operate. But we have a, a extreme focus and we ruthlessly prioritize the most important things. Everyone at the company knows what the north stars of the business are. They know how the thing they're working on ladders up to the north stars. We talk about our business very openly. So, you know, as you've seen, team has lunch and dinner together. Lunch/dinner table conversations are really about, like, our long-term vision.

    8. EGElad Gil25:54

       Yeah.

    9. ZDZach Dell25:54

       Where are we going? What kind of new things should we be thinking about? Um, and, you know, you walk around the office and the place looks like a Best Buy 'cause there's just TVs everywhere, as you've seen.

    10. EGElad Gil26:02

        Yeah.

    11. ZDZach Dell26:02

        Right?

    12. EGElad Gil26:02

        Yeah.

    13. ZDZach Dell26:02

        Metrics everywhere. All the stuff that matters at the company is visible for everyone to see.

    14. EGElad Gil26:06

        Yeah.

    15. ZDZach Dell26:06

        And so, that gives you a level of focus where it's like, if it's on a TV, it must matter. And if it's not on a TV, it probably doesn't matter.

    16. EGElad Gil26:11

        Mm-hmm.

    17. ZDZach Dell26:12

        Right? And that really helps people prioritize. And then I think, you know, we try to be an organization that, uh, people s- you know, I say the word organization and it kind of makes my skin crawl, right? Like, we try to be small and lean and nimble but, as a group, we, we seek and give feedback, right, to each other and we're really open with each other. And, uh, it's a very flat structure. You know, I sit next to and work with interns all the time and, you know, there's not like a, oh, manager's manager manager kind of concept, where, uh, people are very open with each other, um, and we really invest in young talent and try to train them directly with, like, very quick kind of open, direct feedback and, uh, that has helped a lot of us, including myself, level up in a very short amount of time. A lot of us are young and largely inexperienced and so we learn from each other kind of in real time. And I think, you know, we think about our business as a, as a competitive endeavor, right?

    18. EGElad Gil26:58

        Yeah.

    19. ZDZach Dell26:58

        Like, we are competitors and we are here to win. And we frame a lot of the stuff we're doing in terms of competition and we're not afraid to say that and we're very proud of that and I think that's a very unique part of our culture. Uh, and the last thing I'll say is we like to have fun.

    20. EGElad Gil27:13

        Mm-hmm.

    21. ZDZach Dell27:13

        Uh (laughs) , and, you know, we like to laugh and smile and high five and make jokes and, you know, we take our work very seriously but we don't take ourselves too seriously.

    22. EGElad Gil27:19

        Mm-hmm.

    23. ZDZach Dell27:20

        And I think people love being a part of that. They wanna have fun at work, right? If you're gonna be there, you know, five, six, seven days a week, like, you better be having fun and-

    24. EGElad Gil27:25

        So,

17. 27:26 – 30:00

    Zach’s Philosophy on Capitalization

    1. EGElad Gil27:26

       over the last 18 months, you've raised, uh, 1.3 billion. I think one billion just now that you're announcing and it was from a real who's who list. It's Thryv, Valor, Addition, Lightspeed, Altimeter, uh, a16z. I'm lucky enough to, or me and my firm are lucky enough to be involved. And I think the fact that you have this private equity and investment background means that you view the lens of capitalization, how you raise money for a company very differently. And that's not only the traditional venture money which you sell shares in the company in exchange for cash, but also using debt or other more complex structures relative to what you're doing. So I'd love to hear more about how you think about that.

    2. ZDZach Dell27:59

       Yeah. So, we are in a highly capital-intensive industry and our ability to access low-cost capital is a real competitive advantage. Said differently, if you and I are building a thing to go sell to someone else and you have to pay 10% interest on the capital to build the thing and I only have to pay 5% interest on the capital to build that thing, I'm gonna have more money left over. I can charge less for the product and I can out-compete you, right? So, in this endeavor, we have to figure out a way to access really low-cost capital over time but there are different kinds of capital, right? So when we make investments, we invest in operating expenses, Opex, which is the cost to run the business day-to-day. Pay the engineers, pay the rent, buy the snacks, that kind of thing. And then we have, uh, capital expenditures, Capex, which is really the large investments we make in batteries and inverters and manufacturing lines and all the inputs to go, to go into those things. On the, on an operating basis, on the Opex side, we have a pretty clear path to operating profitability and actually, you know, near-term timeline, uh, because the business, you know, generates a lot of cash and revenue and our operating base is low and we're quite efficient and so we can... That, that part of the business can be profitable quite quickly. And then on the Capex side, our ability to raise and deploy low-cost capital here is just a massive, massive competitive advantage, right? So, you know, one thing I've said to the team is, like, this billion dollars is necessary but not sufficient to achieve our mission. You know, and the game that we're playing, which is to build a global energy technology market leader, a billion dollars is the ante to sit at the poker table.

    3. EGElad Gil29:26

       Yeah.

    4. ZDZach Dell29:26

       Right? We're competing against the biggest and most well-capitalized companies on the planet. And so we have to run on that cost of capital curve very quickly and raise billions of dollars in, in a short timeline to be able to compete with them. So, over time, as we prove out the predictability of, and strength and kind of value of our cash flows, we will be able to access those lower cost pools of capital which are typically the largest kind of pools of capital in the world. The largest pools have the lowest cost, right? And so as we access those, we'll continue to invest in Capex while, you know, getting to operating profitability, uh, on the Opex side and be in a position to really control our destiny in the capital markets.

    5. EGElad Gil29:59

       Yeah. It's amazing. I think

18. 30:00 – 31:57

    How Base Power Uses Scale

    1. EGElad Gil30:00

       there's a lot of businesses that people talk about as having scale effects and the bigger the scale, the more the economics of the business get better.

    2. ZDZach Dell30:06

       Yeah.

    3. EGElad Gil30:06

       Right? And so you mentioned one example. Um, steel making has some aspects of this depending on the model that you're doing.

    4. ZDZach Dell30:12

       Yeah.

    5. EGElad Gil30:12

       Payments actually-

    6. ZDZach Dell30:13

       Yep.

    7. EGElad Gil30:14

       ... uh, has this model. The more payments that you have, the lower your interchange fees go on the backend. So if you're Stripe or someone else, you get a real advantage from having real scale. So it's interesting to see how you folks are really, uh, using that to your advantage and-

    8. ZDZach Dell30:24

       Totally. I think you see this mostly in commodity industries where cost is the, is the source of competitive advantage, right? And what we sell is a commodity. Electricity, there's no sexy electrons, right? Electricity is a commodity.

    9. EGElad Gil30:33

       Uh, I think so.

    10. ZDZach Dell30:34

        Right? (laughs)

    11. EGElad Gil30:34

        I mean, it depends o- it depends on who you ask.

    12. ZDZach Dell30:35

        Right. So, um-

    13. EGElad Gil30:37

        Yeah.

    14. ZDZach Dell30:37

        ... our whole strategy is built around driving the cost down for the customer and as we get to more scale, our cost structure goes down, right? Scale economies. As our cost structure goes down, our returns go up. As our returns go up, we pass those returns on to the customer in the form of lower prices. When you have lower prices and you're selling a commodity product, you get more demand, you get more scale.

    15. EGElad Gil30:55

        Yeah.

    16. ZDZach Dell30:55

        You get more scale, your costs go down, right? And that's the flywheel that you create and so, you know, w- why raise 1.3 billion in 18 months? Like, well, because we need to get that flywheel going really fast 'cause we got, you know, to compete with these really large, well-capitalized companies. Now, we're doing a ton of stuff with technology obviously to come down the cost curve in a way that they, they can't and that's really how we win.

    17. EGElad Gil31:12

        That's the real advantage then, to your business-

    18. ZDZach Dell31:14

        Exactly.

    19. EGElad Gil31:14

        ... is the technology, development and innovation versus just the, the money basis which is-

    20. ZDZach Dell31:19

        Exactly.

    21. EGElad Gil31:19

        ... useful.

    22. ZDZach Dell31:19

        Like, 90% of the cost down comes from technology and innovation and 10% come from cost of capital but you really, you want that 10% too.

    23. EGElad Gil31:27

        Yeah.

    24. ZDZach Dell31:27

        And if you can't, you know, like I said about the antes, like, if you can't get the billion dollars and you can't really go compete on a global scale, you're just not gonna be relevant.

    25. EGElad Gil31:33

        Zach, thanks so much for joining me on No Priors.

    26. ZDZach Dell31:34

        Thank you for having me. Really enjoyed it. (instrumental music)

    27. NANarrator31:39

        Find us on Twitter @nopriorspod. Subscribe to our YouTube channel if you wanna see our faces. Follow the show on Apple Podcasts, Spotify or wherever you listen. That way, you get a new episode every week. And sign up for emails or find transcripts for every episode at no-priors.com.

Episode duration: 31:57