Unlocking the Road to Energy Abundance with Base Power CEO and Co-Founder Zach Dell

0:05Today I'm joined by Zach Dell, the founder and CEO of BasePower. Base just announced a$1 billion fundraise from folks like Addition, Thrive, Andreessen Horwitz, 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. 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.

0:42That'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, I know Pryors. Thanks for having me. 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.

1:07You've been working on base energy, excuse me, base power for a couple of years now. Can you tell me more about how you landed on what you're doing and what base actually does? 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 finance world. So I started my career at Blackstone. I was on the private equity team there. I spent a couple of years at Thrive Capital investing in technology companies and then left Thrive ultimately to start the company with my co-founder, Justin.

1:41And I think at those firms, I was able to see a lot of the industry, the value chain 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 seems pretty clear now that based on where the cost curves are going, the next five decades of energy are going to be defined by solar and storage. And there's really no energy technology platform company built around that thesis. And so that is really the kind of vision and the idea around which we started the company a couple of years ago.

2:15And 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 going to go to? What products do you provide? What services? What are you currently doing? Yeah. So the capital really is going to accelerate our vertical integration, which allows us to ultimately lower costs 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 a homeowner.

2:43So 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. Now 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.

3:13So 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 the electron down, driving the availability or the reliability of the electron up, which is really our mission. And so you basically have these batteries you install in people's homes. It's a sort of smart battery, so it can interact with other batteries across the network. And it basically responds to different power availability and fluctuations and allows you to then make money off of that.

3:45Yeah. 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 the income that we generate from that to drive down costs for our customers. How did you decide to work on this problem in particular? Like you had a great vantage point working at Blackstone and Private Equity, which is a generalist team at Thrive. We've done investments in companies like OpenAI and Stripe and others. And so you've seen like a wide swath of the world between those experiences.

4:12What honed you in on energy in this particular? Yeah, it's a great question. I mean, I first got really fascinated with energy in college and I actually worked on a project in the energy space there and actually worked on a number of projects. One in particular was to develop a solar farm and put panels in the ground and sell the power back to the local utility and do it in this very kind of financially engineering oriented way. And so I'd been studying the energy value chain, so to speak, from a finance perspective 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.

4:48And it happened in autos with Tesla. It happened in aerospace with SpaceX. It happened in defense with Anderil and it wasn't being done in energy. And it turns out energy is the biggest industry 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, and what I think is the largest and most interesting category in the economy. 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.

5:20What was the founding team like and how big are you now? What sorts of people? Yeah, this business is a complex coordination problem. We have to be good at a lot of things at the same time. And so the way to buy down execution risk, so to speak, is to build a world-class team of people across a bunch of different domains. So if you look at myself and my co-founder, we have very different skill sets, right? Justin is very operational and technical. He led manufacturing at SpaceX. He led manufacturing at Anderil. Our first hire, Jared Green, our head of software, led the laser topology team at Starlink.

5:51because of 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 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 Anderol. And some other early team members who, you know, Suzanne Dang, who ran procurement at SpaceX for 10 years, our head of supply chain. Andy Ross, our head of manufacturing, who led Model 3 battery manufacturing at Tesla.

6:16Dino Sassarides, our head of hardware, who led powerwall engineering at Tesla and 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 of the company, like all of them were part of our first 10 hires, 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.

6:44They were once the IC. They were doing all the IC work and now the leaders are still doing IC work. I still do IC work every day. 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're able to pull together a really incredible team. That sounds like an amazing mix. Are there specific areas that you're hiring for right now or looking for key talent in? 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.

7:14And so we're really hiring across all teams, software, hardware, finance, go-to-market, business development, regulatory policy, deployments engineering, manufacturing engineering, you know, specifically some areas where we're really focused right now are firmware, power electronics, mechanical engineering, design engineering, all kinds of software engineering, basically everything from very low-level firmware to front-end to back-end and cloud engineering and everything in between. So, you know, right now, as you noted, we've raised$1.3 billion in the last 18 or so months. We've got more demand than we can serve.

7:48We're standing up our first factory in Austin to produce our product at a really large scale. And really the constraint is great talent. And so we want to put the word out there that we're open for business and we want to bring more great people down to Austin to join our team. How did you inspire such heavy weights 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 still growing like crazy themselves.

8:19Yeah. How do you convince people like that to join you so early? I think it's pretty obvious that the best people want to work on the hardest problems 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 has been going up every year the last 10 years and my power outages are becoming more frequent than they've ever been. Like, this is a problem that actually needs solving.

8:47And then look, I think the best people really largely are most people are looking for three things. One is they want to have fun at work. They want to do interesting work. They want to work with smart people that are nice to be around. They want to be pushed. They want to be challenged. Number two is just a massive kind of never ending list of hard problems. I think you see at companies, you know, hire a bunch of really great people, come up with 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.

9:15If you peek under the hood at base, which you have, you know, with the best of them, you'll see that the list of hard problems to solve is really mind blowing. And we kind of unlock the ability to solve new problems as we enter new markets and release new products. And the energy space is big and it's complicated. It's hairy. So it's a massive bucket of hard problems 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, you know, opportunities in the economy, one of the biggest companies in the world. And, you know, if we're successful, you know, it's going to be very big.

9:46And so there's a really exciting upside case there for top talent. So 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 to write, et cetera, because it's an input into everything. you know projections that we were discussing earlier said that the demand for energy may be going from a two percent compounded annual growth rate a year to closer to ten percent 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 yeah um a do you think those projections are correct and b how do you think about how we solve for that i do think directionally the demand projections are correct and i and i think that or or actually uh potentially understated uh i think there's a massive amount of electricity demanded coming.

10:36Now, how do we serve it is the question. You'll hear people talk all the time about, oh, we're running out of 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. And another way to think about it is, you know, the U.S. grid kind of max peak is somewhere on the order of 700 gigawatts. But average demand across the country is closer to like 300 gigawatts, right? So we've got another 300, 400 gigawatts, you know, up to 700 gigawatts if you believe that, you know, that peak is going to grow to a terawatt. of latent capacity.

11:04And, 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 going to 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... What do you think are the most promising aspects of generation? So, I mean, I think we've seen a lot of this progress happen in solar, right? The solar cost curves have been, you know, aggressive to say the least, and they've played out, right?

11:32And now the cost... It's largely been driven by Chinese subsidies because I know the Chinese government subsidized a lot of very early solar production. It's been driven by capex. And then the demand curve takes over. Yeah, it's been driven by capex. A lot of the capex has been subsidized by the Chinese government and through Chinese companies. A lot of capex has come from U.S. companies and companies in Europe. And so 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. And I think Texas is now the biggest deployer of solar.

11:58Is that correct? Solar and wind. And wind. And it's interesting because 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. Do you know what percentage of the U.S. market is now solar in terms of actual energy production? It varies a lot by state. Texas is about 20 % right now in the fuel mix, and it's on the higher end. I think California is higher, closer to 30, and you have states like New Mexico, Nevada, Utah, Arizona that are up in that range. And then, I mean, it's funny. I think you pointed out to the—sorry, go ahead.

12:26Well, if you look at the map of the U.S. and you map solar penetration as a percentage of a fuel mix, it pretty closely maps like where the sun is, right? A ton of solar in the sun belt 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 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 across the country.

12:55And I think there's a lot of great work happening there, but right now it's too expensive. Do you think it will incredibly take off? Because, you know, I looked into the cost structure for nuclear before and there was two or three drivers. 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 of 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 because we're like, if we're going to take the hit, we may as well take the hit big.

13:24People are now moving towards these smaller, more modular reactor systems. Do you think that will actually credibly take off? Because 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 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? I don't think it's in the water. 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 might just not matter.

13:57It'll be so easy and low cost to deploy solar and storage that the economics of building nuclear reactors just won't make sense. And is storage really the core component of it? Yeah, because, I mean, you have to, you know, the sun is only shining so many hours a day, right? So you need storage to kind of firm up that solar. And that's because you can't really transmit, like, long distances on the grid, right? Well, you can, but there's transmission costs. And so what matters is the landed cost of the electron. And so solar and storage is the way that you get that landed cost down. 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.

14:29But right now, we're not in a world where it's really competitive with solar. But at base, we are fans of all kinds of energy generation. We're really more competitive, so to speak, with poles and wires than we are with solar, wind, nuclear, geothermal, hydroelectric, et cetera. Batteries move energy through time, right? 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 I don't think is all that likely, you have to have a lot of these reactors everywhere.

14:59You need to move the power. You have to match up the generation of the power with the supply with the demand, right? And so we think having storage demand side really helps you smooth that curve out. So you're basically really moving from a centralized grid to a distributed grid. Correct. And that's the core insight of what you all are doing. And to your point, solar is the best way to create that accord insight for energy generation in general. 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 and increase the reliability of energy.

15:27If you look at a lot of the things that people talk about as things that open up with lower energy or open up entirely new markets, I mean, one is just AI and data centers with these massive buildouts. We're going to need energy for them. There's things like desalination. like you should be able to produce water anywhere where there's like um an ocean or anything else yeah green hydrogen electrolysis uh i mean the cost per megawatt per kilowatt is a is an input to all these processes and as we drive that cost down you know take desalinization for example right now it's kind of an emergency use case every once in a while thing if it was five times cheaper like this would be something that we did all the time in lots of places now again geographically geographically defined, where do you have saltwater?

16:09Where do you now have it? But we'll see a massive boom in large-scale infrastructure technology projects as we drive down the cost of electricity. And boring stuff too, like heavy industry and building refineries and things like that that really matter that keep the economy going. We'll just see more of it as we drive down the cost of electricity. And do you think those will all centralize next to cheap energy or cheap power? It's nuanced. I think at the limit, yes, more of the highly capital intense energy dependent use cases will go towards the low cost energy parts of the world. And I do think you'll have energy hubs where there's a ton of highly available low cost power and a bunch of heavy industry goes there.

16:47But as you know, there's nuance in all of these things and there's technology. there's geographic implications here where it's like, well, you need X, Y, or Z in X, Y, or Z place because of this other reason that it does not have to do with the cost of electricity. So I think largely it will concentrate to the low-cost electricity places. What do you view as the low-cost electricity places of the globe today? Right now, unfortunately, it's China and we got to make the United States. And is that because of solar? Is that because of nuclear? It's supply and demand because they built out a massive amount of supply and it's all of the above, right?

17:16They built nuclear reactors. They built solar farms. They built wind farms. They built a ton of battery storage. They have tons of high voltage transmission. And so our hope and really what we're working on is kind of stimulating this build out of the U.S. I think Texas will be a low cost place to build energy technology, build all technology due to the cost of energy. And I think other parts of the country will pop up as energy hubs as different states and policymakers and regulators really embrace that. Okay. And then one thing that I've heard 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 buildouts where you take a bunch of data and you train a new model on it are going to basically happen in the US and the Gulf.

17:58They're not going to happen in Europe because of rising energy costs, as well as because of some of the extra regulations. It's not going to 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 going to be in two parts of the world and they're going to be effectively a U.S. domain? I think the highly energy intense workloads will converge around the low cost electricity 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 and all the big projects that have been announced in the Gulf.

18:28So I do think that that is likely to continue playing out in that way. 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. You mean what will drive more build out of energy technology? Like what's lacking today or what technology is most promising or what do you think are the most interesting shifts happening from a technology? Yeah, I mean, talking to my book a little bit, I think batteries are the key. batteries are the unlock to the energy transition and will continue to drive out cost, both the hard cost and the soft cost, right?

18:58I mean, you have the cells and the modules and the power electronics and the bus bars and the current collectors and all the things that go into a battery. But then you have the EPC, you know, getting the battery in the ground, the logistics, the transportation, all the software that goes on top of it, monetizing these assets. And there's cost to attack in all parts of the stack. And so I think that battery storage will be, will define the next chapter of the energy transition. And I'm super hopeful that new kinds of generation will break through as super economic. And I hope that breakthroughs happen in nuclear.

19:28And, 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 defined problem in parts of the Pacific Northwest. And in Canada, where there's tons of hydro, it makes a ton of sense to use that as a generation type. And, you know, in Texas, you don't have a lot of that, but you do have 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, you know, another way to think about this is like, look at the cost of an electron, right?

19:54Basically, anywhere across the country, the cost is really made up of two components. One is the cost to make the electron. The second is the cost to move the electron. The cost to make the electron has gone down really significantly over the last 20 years, largely driven by the build-out of solar. But the cost to move the electron has gone up very significantly because our infrastructure is aging and utilities have this kind of perverse incentive structure to build instead of innovate. And so costs are going up. So, you know, the generation technology, solar, wind, nuclear, hydro, geothermal, they're really attacking the cost to make it.

20:22We'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 innovate and to drive out costs, which really all that matters in the commodity industry, which energy is, is, you know, opportunities around transmission, distribution of power and driving those costs down. Could you talk more about the incentives that exist for utilities and why the costs of transmission are actually going up versus down? Yeah. Utilities are regulated monopolies. And the way that the regulated entities work is that they earn a rate of return, a predefined rate of return on the capex that they invest in.