Inside the Factory Using Rocks & Sunlight to Fix AI's Power Problem | Exowatt

15:02Sourcery Host:And so you kind of combine these together, string them along, and then you can get to any power profile or any energy profile you need. The simplest way of explaining the technology is like the five-year-old version. Imagine if you're out in the woods or at the beach and you find a rock, right? And you grab the rock and you have a magnifying glass in your pocket. And then you hold the magnifying glass to the sun and then you heat up the rock. The rock's going to get hot. You just wrap that in a blanket and put it in your pocket. That's kind of your battery. And then you stick a sterling engine on, which I'll show you.

15:32Sourcery Host:and that's going to basically just start running based off that heat differential and make electricity. So that's really what we do. It's not really rocket science. But it's rock science. It's rock science, exactly. Yeah, yeah. So we'll show you some of the rocks as well. I love a good dad joke.

15:56Hannan Happi:So what are the rocks? Like what type of rocks are they?

15:59Sourcery Host:You could use any kind of rock so we have developed a specialized rock that could handle the temperature profiles and go through the cycles a lot But we're maintaining the rocks at about 800 degrees Celsius to a thousand degrees Celsius so that's you know equivalent about 2 ,000 degrees Fahrenheit and You can use any rocks riverbed rocks you could use fancy ceramics There's there's nothing that's necessarily secret to what kind of rocks you use. What's really important is how you transfer the heat to it, make sure that you've done testing to make sure that the rocks don't break over time and they can handle the cycles.

16:39Sourcery Host:And that's a lot of the testing that we've been doing and have done and developed our material around it. But the most important thing is if you think about the raw materials that we use at the end of the day it's essentially sand and dirt and and steel right and so the sand is essentially quartz that's converted to the lenses to the installation that we use to even the the rocks essentially and and same with the dirt and then the steel is just for the enclosures and the engine parts and really nothing fancy about it and that's really one of the key value props here is that you can make this domestically using very simple raw materials and you don't have to go import something from China.

17:25Sourcery Host:And it's really important because you think about we're building the backbone of our AI infrastructure on borrowed technology, right? And so we're trying to do this here domestically. And I think we're just getting started. So we have lots of room to grow, but there's a very clear path to how we can support data center growth, and in general, other power applications, heat applications, industrial applications, at the multi-gigawatt scale very soon. This is the other side where we do a lot of R &D. Just to tell you why I said this is a production studio. So this room you see here, this was a projection studio.

18:01Sourcery Host:So this is where the projector was. That's the kind of opening where the projector was projected, and inside there was a like a movie like a like a cinema yeah screening studio yeah so um anyways we've got lots of various uh r d components here that that i can talk you through but the main

18:19Hannan Happi:highlight is if we go outside we can show you oh wow how all this comes together we're uh currently

18:28Sourcery Host:uh maintaining some of the machines so all of it is not running but i'll show you kind of the elements of it as we go outside. Again, you ask like why in Miami? People don't expect to see this in Miami, but the fact is first of all you have this sun which you wouldn't otherwise have in San Francisco all the time. Second of all you've got a lot of great talent because South Florida is actually the center of a lot of the energy activity in the U.S. Like the largest energy company, a renewable energy company in the country is here and then you've got a lot of data center developers also in South Florida as well.

19:01Sourcery Host:So we've got lots of great talent, lots of great investors, and yeah, lots of great stuff to show you here. But I'm gonna put on my sunglasses because otherwise I'll get a headache. But yeah, so what you see here is how this all comes together. So you've got the lens table at the top, right? So each one of these is sitting on a 20 foot skid. So inside you saw a 40 foot skid, we've now downsized it to a 20 foot skid for ease of handling and manufacturing. and then that light is getting focused onto the battery cells or the rocks that's essentially in these enclosures and then we blow air using the blowers that you saw into this first shipping container here that's essentially where the PCU, the power conversion unit engine sits and then that air gets looped back in so it's not like we're taking ambient air and then heating it up and then making electricity out of it it's actually that we are cycling the air every day about 200 degrees Celsius.

19:57Sourcery Host:So we're going from 600 to 800 to 800 to 1000 degrees Celsius, and that's what's helping run the engine. So it's high temperature, but not extremely high temperature where you've seen some companies make batteries that are 2000 or 3000 degrees Celsius. So this is what we have today. And then the optical table again, of course, tracks the sun. Right now, this is not hooked to the grid, but rather our EV chargers.

20:30Sourcery Host:You can see the Rivian Charter here. Actually, if we go to the other side, I'll show you some other cool test stuff that we're doing. If you come inside here, we have these containerized engine test stands. So these are test stands that can run around the clock for our various engines. They're currently, as you can see, fixing one of the test stands. But we build these because they can be separated from the building and we can run them all the time without having to worry about any security or safety issues. And here you have another test stand which is used for essentially various temperature profiles that we run the battery at.

21:16Sourcery Host:And I'll show you what's inside here when we go inside. So this is an engine running

21:28Sourcery Host:You can see the engine at the very far back if you come around That thing at the far end is the engine and then all these pipes are just blowing hot air into it So this is inside that shipping container that I showed is a similar setup Where we're just getting the the hot air from the battery cells the rocks into the engine right now This is just doing it from the ambient using heaters. Yeah, we can close this for safety.

21:57Hannan Happi:It's like every time you open a different container, there's like a little city inside. Yeah, yeah, exactly. Quick note before we keep going. I've been investing on Public for a while now, and it's a really solid platform that combines stocks, bonds, options, and crypto with incredible AI tools that let you do things like build a completely custom investable index from a prompt. Right now, Public will give you an uncapped 1 % match when you transfer your portfolio. Check it out at public.com slash sorcery. Public. Investing for those who take it seriously. Paid for by Public Investing. Full disclosures in the description.

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23:17Sourcery Host:We have rocks here. Lots of rocks. I'm not collecting them yet.

23:26Sourcery Host:Yeah, if you come here to the left. Gosh, this space is huge. Yeah, it's about, as I said, 40 ,000 square feet. So, as I mentioned, this is kind of what we're talking about, various rocks. This is where you heat up and store the energy in, and essentially the rest of the stuff you see also. This is our materials lab. We have various kind of devices here for testing. We have ovens, we have all sorts of microscopes and everything else, But we have various rock samples, as you can see here as well. But yeah, this is essentially how the XO at P3 works. And really the vision and ideas to scale this to the millions and billions of units.

24:19Sourcery Host:We started productionizing this first generation that you saw outside last year. and now we're working on the next generation that's even simpler and cheaper and going to scale that significantly this year to ship to some of our hyperscaler customer projects. We've been very fortunate to have a backlog of over 10 gigawatts at this point working with the leading hyperscalers. And I know that sounds like a lot, but the pace at which data centers are now building, it's not a lot anymore. When we started the company three years ago, I remember, and I was new to the data center world, like a big data center, I think the largest data center at that point was 100 megawatts.

25:02Sourcery Host:And like a rack was like 50 kilowatts or 100 kilowatts at most, even less than that. And, you know, when we were talking to customers, it was like, oh, we're building in 25 megawatt blocks or something like that. And then as time went by, the kind of large data center became like a gigawatt. And then recently now it's become 10 gigawatts. And it keeps on growing. And then the racks keep on getting more energy dense from like 50 kilowatts. And now people are building racks that are a megawatt, which is insane. And sometimes people say, well, I don't think people contextualize how much energy that is.

25:40Sourcery Host:So if you talk about a gigawatt data center, that's almost a million U.S. households of energy. So if a data center says I'm building a five gigawatt data center, they're basically building a city that's five million households. And they're building in a very tiny footprint, although not so tiny. The funny thing about data centers is when they start talking about buildings in acres, you can start realizing how big these buildings are. So like a five gigawatt data center itself, the building, not the power infrastructure, nothing else, is going to be 5 ,000 acres.

26:13Hannan Happi:Oh, my God.

26:14Sourcery Host:So that's just the building for the data center. And then you have all the other infrastructure around it. And I don't think people really appreciate how big these buildings are because historically data centers were built normally around urban, suburban areas. That's why you have a lot in Virginia and in North Carolina and Chicago and other places like that. because the biggest data center was maybe 100 megawatts. Typically, data centers were like 20, 30 megawatts. And the typical approach was, well, I'm going to build a data center. I don't really have to think about power because I'm just going to plug it into the grid and there's going to be power.

26:49Sourcery Host:There was really never this constraint of power as an equation. And now, as data centers have become bigger and bigger and bigger and the hyperscalers want to invest more and more, as you've probably seen, like the Googles of the world and so on and so forth, They're planning on investing a trillion dollars in CapEx and data centers over the next couple of years. That means that you have to consume more power and the grid is just really not built for that. And what that means is the data centers now have to get how to bring their own power online. Because it's also important that, you know, when you plug in a data center, it consumes a lot of power from the grid, which also means you and I as rate payers will have to pay for that additional infrastructure that has to be built to support that.

27:31Sourcery Host:And I think that's become a big issue today in the U.S. where these data centers are being built and they're harming the communities, increasing the energy prices, they're taking the scarce resources that the communities have like water. And now we're seeing a shift to building data centers that are no longer connected to grid. Two or three years ago, it would have been a sin or impossible to tell a data center customer we're going to make a behind the meter power generation asset. Behind the meter being like or off grid being you're not connected to grid, you're not flowing through the grid. But, you know, over the last year, you've probably seen that's become, you know, norm.

28:06Sourcery Host:And unfortunately, most of these customers are using natural gas generators to power the data center because it's available. And, you know, that gas is whatever. You just burn some gas and you can make electricity. It's certainly not cheap. It's, of course, not sustainable. and if you think about the context of the war we're in right now, it's not really a good idea to bet your data center power on a gas backbone. So what ExoWatt is really doing, our mission, is to build a solar backbone, which is free energy, right? The sun is free, it's available. You can power the entire U.S. 100 ,000 times over with tiny speck of solar panels.

28:46Sourcery Host:Even Elon Musk famously said that a couple of years ago and a couple of times. and the only kind of pushback sometimes we get is like, well, solar takes a lot of land, but the reality is we have so much land. 41 % of the US is empty, like zero people live there, according to the Census Bureau. So land is really not a constraint. I think it's going to be also good for the communities to not go build data centers in the metro areas where people live and it's going to affect them and affect their health, affect their energy prices, to go to these barren land areas and build these data center projects.

29:23Sourcery Host:And just recently, we launched an initiative that we call XORISE, which is to go develop these land sites and build multi-geekawatt data centers on top of them. So that's something that we're super excited about. Our chief data center officer, Nick, who recently joined us, is leading that effort. And you'll be hearing a lot of those projects coming online in the next year, I would say. We'll have some news there for sure.

29:48Hannan Happi:Wow. So in terms of the funding side of Exowatt, how much have you raised to date and who are your investors?

29:55Sourcery Host:Yeah, we've been super fortunate to have the best investors back to company. So as I mentioned, we launched it from a venture studio called Atomic. They initially gave us the pre-seed funding, if you will. And then in 2024, we came out of stealth and we launched our raise our seed round, which was led by Catherine Boylett, Andreessen and Sam Altman. and then later that year about six months later we raised our series a and that was led by felices and and then 80 90 and mvp so in total we've raised about 140 million dollars over the last two years and it's been great i mean we've got tons of great investors with tons of knowledge about the industry and also very deep pockets to help us scale the business But if we think about how do we take this to the next level and how do we deploy multi-gigawatts scale projects, we'll need even more funding.

30:48Sourcery Host:And so we're going to be making some announcements on that front very soon as well.

30:53Hannan Happi:Oh, interesting. Yeah. That's exciting.

30:57Sourcery Host:Yes.

30:57Hannan Happi:So with investors like Sam Altman, how are you working with strategic partners? and I don't know if it extends just to OpenAI, but these other hyperscalers that are customers, how are you strategically being involved and what have you learned from them?

31:13Sourcery Host:Yeah, I mean, we've been very fortunate to be able to talk directly to all the hyperscalers, learn about their needs, learn about kind of how we can support them and have relationships with all of them. We haven't announced any of these projects publicly, the commercial projects that we have with them, but hopefully soon we can talk about them as well. but it's been a learning experience for me. I have an energy background. I understand how power works but just how data centers consume power has been a learning experience for us and I think it's also been a shifting, evolving story. Just as I said, just where they take power from is one topic and then how that power is consumed is another topic especially when you think about data centers not only consuming a lot of power but if it's an inference data center or a training data center, they also consume that in a not necessarily baseload way.

32:07Sourcery Host:So people think, oh, data centers are baseload, means like you have a flat load. But it's not like that. It's like going like this all the time. And there's a lot of power electronics that you have to develop to actually handle those transients. And we've been learning about that and developing our own kind of solutions towards that as well. And, yeah, we're really excited to support these hyperscalers and their projects that are coming online next couple of years. I really hope that we can scale our business as fast as possible to do that, to build this sustainable infrastructure, because otherwise we're going to be left with tens or even tens of gigawatts of Mac gas burners that are going to last for another 20 years.

32:49Sourcery Host:And they might be a quick fix now, but I think the hyperscalers know they're going to pay a price for this later, both in terms of penalties for emissions and also just the cost of energy that's going to go up. So the sooner we can get this to the market and scale it in a very significant way, the better everyone will be off.

33:10Hannan Happi:And then they'll start their carbon offset campaigns a little bit more to make up for that.

33:16Sourcery Host:Yeah, that's an unfortunate fact that is kind of like gone out of the vocabulary of all the hyperscalers is there's no more like sustainability is our priority. You know, it used to be one of the objectives, but it's now time to power, right? I need power. I don't care how you make it, you know, squeeze penguins if you have to and I need the power. And then second to that is like the cost of power. but that's to be honest very secondary at this point you know data centers are in so desperate the ai race is so intense that cost is kind of like secondary for the most part and then third fourth and fifth are other things probably and then six or seven is now like i want to make sure it's sustainable um and that's not a fortunate thing it doesn't have to be that way but we're here to fix that.

34:07Hannan Happi:Given, and you did mention this a bit beforehand, but given you're so close to the actual build out of these data centers, you understand where they are in this cycle and adoption and that kind of thing. What are the biggest misconceptions or I guess hidden truths about where we are right now in the world of data center adoption?

34:31Sourcery Host:Yeah, I think there's a lot of headlines about data center projects being planned or initiated. I don't think all of them are actually happening. So there's a lot of like phantom data centers that are being announced. Let's call it that way. I think data centers are definitely in a rush to get online fast. They do have massive supply chain constraints. Two years ago was maybe NVIDIA GPUs. Now it's power. and now it's actually not even hardware, it's actually labor. So the biggest kind of challenge for data centers today is there aren't enough construction workers to build a data center. So you have to import people from other states to a site to build a data center.

35:17Sourcery Host:And being an electrician these days is actually a very high-paying job because there aren't enough electricians to even twist wires and just hook things up. So I think some people always think that there's a bubble and this all is going to go away. But the reality is, if you look at the CapEx budgets and the spend that's happening from the hyperscalers, it's very large and it's pretty much planned for the next couple of years. So I would say until 2030, there's no doubt that this is going to continue to scale at this rate. The question is like, what happens after 2030 and is it going to continue beyond that?

35:55Sourcery Host:But data centers are super expensive, by the way. You could kind of say, rule of thumb, one gigawatt data center or per gigawatt, you have to spend about$50 billion of CapEx, which is an insane number to think about, right? You know, I was talking, when you talk to folks in the industry, you're like, yeah, it's the same numbers more or less that we had like three or four years ago. It just has a couple more zeros behind it. It just becomes larger and larger and larger to the point where even the hyperscalers want to go get debt to fund this because they don't want to, you know, maybe they don't even have the capability to fund this from their balance sheets.

36:35Sourcery Host:But, yeah, the data center build out is happening. I think what we're trying to really influence is to make sure that it's done sustainably. We're trying to make sure that it's done outside of urban and suburban areas where it could affect the communities. I talk about energy prices, the other aspect is really health. If you think about they're burning diesel, they're burning gas, in the gigawatts, this is going to have a real health impact for people living around those data centers. So I think we've got the kind of solution here. Now it's really about scaling and adopting it at scale and bring this online very quickly.

37:17Hannan Happi:So through all of this and building Exowatt to what it is today, what were the biggest lessons that you learned early in your career?

37:24Sourcery Host:Yeah, I mean, as I mentioned, I used to work at Tesla for the launch of the Model S when the Fremont factory was getting built. And it was an amazing eye-opening experience. Tesla wasn't a popular company. We had to fight for a lot of currents to uphill to get there. But kind of really the lessons learned were to, first of all, have an amazing, dedicated, mission-focused team. Like I think that's the primary ingredient that actually got Tesla through. The second one is to build a great product that customers really want and enjoy. And that's something I also learned at YC, right, from Sam, build something people want.

38:03Sourcery Host:and then really hardware is hard. So you want to try to figure out how to create the shortest feedback loops possible and learn from that as fast as possible and scale that as fast as possible. And that's kind of why we chose this modular approach instead of going and building a giant infrastructure project and saying, well, we need 10 years and a billion dollars to get to our first demo site. We said, let's build the smallest thing, learn from that, iterate quickly and build the next generation, next generation, do that quickly and fast. And then the last thing about, you know, everyone coming out of Tesla, you know, you're obsessed with vertical integration.

38:38Sourcery Host:You want to build everything a house. We haven't done that at ExoWatt to that extent yet. We've started working with contract manufacturers because we know we need to scale fast quickly. So they have that infrastructure. But, you know, Elon really taught us how to vertically integrate everything and build it yourself and build it better, faster, cheaper. And don't take no for an answer. Yeah.

39:01Hannan Happi:Amazing. Well, it's awesome to see everything that you've built and not only how cool it is to be involved in this next generation of the AI super cycle, but do it in a sustainable way and create a ton of jobs here in Miami.

39:14Sourcery Host:Yes. Yeah, exactly. That's the other thing I forgot to mention about data centers. Data centers build out itself creates some construction jobs, but after it's built, there's not a lot of jobs that are required to maintain it. But we're building factories to build infrastructure for those data centers, and those are going to create tens of thousands of jobs per factory. So I'm really excited about that as we continue to vertically integrate into the future to create a lot of jobs for all the communities that we're going to be building with.

39:43Hannan Happi:Amazing. Thanks so much for coming, Molly. Hey, it's Molly. If you enjoy our interviews, check out our newsletter, sorcery.bc, where we deliver a once a week top deals and tech headlines email and also go deeper on our podcast interviews. Subscribe to Sorcery today. And don't forget to subscribe to the podcast on YouTube, Spotify, Apple or wherever you listen. Link in description to sign up.