First Time Founders with Ed Elson – This Founder Raised $900M to Power the Grid

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1:12Scott, you recently wrote a post on your blog, No Mercy No Malice, about the energy industry and your predictions for what is going to happen in terms of our energy consumption and global energy demand. Could you summarize what your thoughts are there? We always find a way to put energy to work. And I think that essentially when you look at the problems around carbon and global warming, and then you couple that with so many nations developing who want, who are producing hundreds of millions of people coming into the middle class. And what happens when you come into the middle class? You start getting a car, your energy consumption goes up, you start eating more beef.

1:51All of these things that require a ton more energy. The demand here is insatiable. And so people who come up with, whether it's nuclear or some sort of different renewable or near self-propulsion machines in the ocean, whatever it is, that is going to create a lot of billionaires and maybe our first trillionaire.

2:18Welcome to First Time Founders. Here's a stat I learned recently. A chat GPT request consumes 10 times more energy than a Google search. We're in the early innings, but AI is already using up more power than small nations, and that consumption is expected to triple by the end of the decade, which leaves us with an existential question for our planet. How are we going to keep the lights on? My next guest is a pioneer in energy, specifically energy storage. After designing batteries for Elon Musk as Tesla's director of energy, he decided to start his own company to help us store energy cheaper and for longer.

3:00Over six years, he raised$900 million in funding, built a 1 million square foot battery factory in West Virginia, and will soon deploy the biggest battery ever created. There are few individuals alive today who have had a bigger impact on the energy industry and its future. This is my conversation with Mateo Jaramillo, CEO and founder of Form Energy. Good to see you, Mateo. Good to see you, Ed. Nice to be here. Let's get right into it because I know that you don't have all the time in the world. So, you know, we've been discussing energy a lot on this podcast recently, more than usual. And it's been coming up a lot, mostly because of AI.

3:44Just a couple of stats that really grabbed our attention. one is that energy demand for AI is currently doubling every hundred days. And two, partly as a result, the total amount of energy consumed by data centers is expected to triple in the next six years. And for context, that would be enough energy to power 40 million homes in America. Now, I know there's a lot more to the energy conversation than AI, but I would say that the key takeaway that we're learning is that basically in the next few years, we're going to need a ton more energy, far more than we produce today. And we're going to need new innovative solutions to generate, store, and distribute that energy, which is exactly what you are doing with your company, Form Energy.

4:31I'd like to start with some very basic stuff before we get into you and Form. Your mission is to, quote, transform the grid. I hear that term a lot, the grid, the electric grid, the power grid. What actually is the grid? The grid is perhaps the most complex machine that humans have ever made, and also the largest. In many ways, think of it as a single integrated entity, by continent more or less, where we are simultaneously producing and consuming a commodity at the same time. And in the case of the electric grid, that is, of course, electricity. And today, that's happening on every continent in slightly different ways.

5:14But largely what we do is we generate electricity in one location and we move it to where it's needed, where the demand is, where what we call the load sits. And so we have this reconciliation that's happening on a sub-second basis. In fact, a microsecond basis for production and consumption of a good. So that's what we're talking about when we say the grid. It's basically the electric system, the production or generation, as we say, the transmission, the distribution, and then the consumption. But you are an innovator in storage, and I don't think you mentioned that word when you described the grid there.

5:49I don't think a lot of people understand or appreciate what a significant industry that is, let alone realize that it actually exists. Give us a rundown on energy storage. What is it? What are the different types? How does it play into this complex system which you described, which is the grid? Yeah. And part of the reason I didn't mention it is because one of the reasons why the electric grid is so impressive as a feat of engineering is because it doesn't use a lot of storage. In fact, it's sort of counterintuitive, at least not from the generation to the consumption side of things. You think about any other very large industry, it could be retail, you know, refrigerated goods, it could be data.

6:26We have data warehouses, it could be, you know, you name it. There is a version of inventory that sits somewhere between production and consumption because it's a natural thing to do, right? That's how we sort of move things around and become efficient at that. Whereas on the electric grid, we're doing all of that in real time, right? Generation and consumption. There's upstream versions of storage. We have liquid fuels or we have coal or we have these kinds of things. But in between the generation and consumption, we don't have a lot of storage. So this is a growing area because there is a growing need for storage because now we have different kinds of generation.

7:03We do not have those fuels in many cases to just store and have sit around until we need them. Yes, we still, of course, do some of that, but increasingly in very large volumes, the lowest cost version of electricity is the renewables. And these are, by definition, weather-driven renewables and therefore intermittent. They go away and they come back. And so we need to think about the storage that we need to reconcile these generation resources at the scale that is really impacting the entire electric system. Now, there has been electric storage on the grid from the beginning because people did realize some of this is a challenge.

7:42And primarily it was water. So you sort of had water up on a hill more or less, and you would run it through a turbine going down the hill to generate electricity. And then during periods of low cost, you would pump it back up the hill. And so that's been sort of a known way to use energy storage for a very long time. And, of course, we rely on nature's natural mechanism for that, which is snow in the mountains, which very helpfully melts during the other half of the year. and sends water downstream that we sort of capture, which we then put to productive use. And so the question now is, how do we bring more types of energy storage onto the grid cost-effectively and at scale such that we can incorporate even more of these low-cost renewable but intermittent sources of electricity?

8:23So it sounds like then coal, oil, those are both energy producers and examples of energy storage. That would be right? Exactly. In some ways, yes. And, you know, I mentioned the use of energy storage paired with renewables, but in fact, they can also be very effectively paired with those conventional resources as well. So I mentioned sort of intermittent weather, right? Some going down, some coming back. But we also live in an increasingly volatile weather environment where we have these storms, you know, extreme heat or extreme cold. And that is also stressing the way that we have generated electricity for a very long time.

9:03So look at the winter storm Yuri, which was this storm that happened a few years back in Texas and caused$60 billion worth of damage. You know, this sort of unprecedented freeze in the middle of February in Texas. Right. And one of the major reasons why the blackout lasted as long as it didn't was was so, so impactful was because the natural gas resources were frozen in place, more or less. In other words, you couldn't access the stored energy. Right. And so that's another way that we're looking to say, well, what is a non-correlated way to store this energy in such a way that we have just a really reliable, robust system overall?

9:40all. Because increasingly, and I'm sure we'll talk about this on the AI front, increasingly electricity is a requirement to operate the modern society. There's a woman who runs a utility called Portland Gas and Electric, Maria Pope, and she's a leader in the industry. And she's fond of saying that electricity may only be 2 % of GDP in the United States, but it's the first 2%. And everything else sort of relies on that 2%. And so having different kinds of energy stores show up in ways that it hasn't been required to previously becomes a really interesting and compelling and fun, frankly, aspect of sort of where we are in the electricity industry.

10:20So it's almost like, I mean, just to put it very simply, you know, a wind turbine is generating the energy from the wind, but it's not necessarily storing it. And as we increasingly rely on renewables. We're going to need more ways to store that energy in a way that, and I love that point you made that, you know, the freezing weather conditions, we couldn't even access those more traditional forms of energy storage. Which brings us to batteries. I think some people, maybe not everyone, has heard of the lithium-ion battery. I feel like there's been this increased interest in lithium. That's what I understand to be the, what do we want to call it, blue chip battery that we have been using for energy storage for however long.

11:05You have a different battery called the iron air battery. What's the difference between this traditional battery we've been using for the past however many decades, I actually don't know, versus your battery, the iron air battery? Yeah, so lithium ion has been around for some time. It was sort of first discovered in the late 70s, early 80s. There's different variants of that battery. So lithium ion covers a class of different kinds of those batteries. And it was commercialized in the 80s for camcorders. So pre-cell phone, of course, you had to have a dedicated device, which was a shoulder-mounted camera, you know, this huge bulky thing, but was an enormous success commercially because for the first time you were untethered.

11:47You didn't have to keep this thing plugged in and you could walk around, you know, your kid's baseball game or a wedding or whatever it was and, you know, take video footage. That's why lithium ion was commercialized. And lithium ion is a wonderful chemistry, principally because of density. So you can cram a lot of energy in a very small amount of volume, and it doesn't weigh very much. And so it enabled all these subsequent consumer electronics applications, the ones that we sort of take for granted today, laptops and phones that fit in our pockets. And they are literally right next to our existence.

12:19We're so reliant on them. And so it's no surprise that we're also using a lot of lithium-ion batteries for the electric grid because it's a proven technology. It's now being made at massive scale, especially thanks to the automotive industry, which is driving that scale and cost down. And largely what they're doing is helping to meet the peak of the electric grid. So think about the patterns of electricity consumption that happen throughout the day. They follow the patterns of human existence, right? So very quiet at night, and then they ramp up during the day, and there's a peak that you see, which happens in the middle of the day when sort of activity is at its greatest, and then it comes down over the course of the night and sort of goes to bed, if you will.

12:58And historically, we've used coal or natural gas or hydro to sort of match those cycles. We turn things on and off or ramp them up or down. And batteries being wonderful at coming on when we need them and going off when we don't need them, that's the very first application for lithium ion on the grid as well, is to meet those peaks, those relatively short duration peaks that we have as an electric system. because again, we need to reconcile all of this in real time, right? It's use it or lose it electricity. And so having these batteries show up instantaneously and provide that power exactly when we need it for a few hours and then go away, that's a very helpful function for electric storage.

13:36One key feature of lithium ion or any battery really is that duration goes hand in hand with cost. In other words, you can't really separate how long you discharge it from how much it costs to do that, right? Because it all comes down to that. And lithium ion is great from an energy density standpoint. And from a cycle standpoint, you can charge and recharge it many thousands of times now. It is not so great, comparatively speaking, from a cost standpoint. And so for the purposes of the electric grid anyway, phones and laptops and cars are quite different. But from the electric grid standpoint, it's cost effective to only discharge it for a few hours at a time.

14:14In other words, generally between two and four hours duration. Anything longer than that, it's really just not cost competitive. And so think about the landscape of the electric grid. We have to solve all of the challenges of intermittency, not just a few hours at a time. We've got to solve for seasonal imbalances. We have to solve for extreme weather that sits around for a week or for four days or whatever it might be. And so to solve those problems, we need to start to look to other types of energy storage that really can be cost-effective over those much longer durations than just a couple hours at a time.

14:49Which brings us pretty nicely to the iron-air battery, which, from my understanding, it lasts several days in comparison. One of the reasons why we like this technology was it had been demonstrated. You can rust and unrust iron reliably many times, but it had never been commercialized because it didn't have a killer app. It was first investigated in the 1970s in the United States under actually a grant from the U.S. Department of Energy to Westinghouse, which was one of the main electric entities at the time, as well as a Swedish national lab right around that same time as well. But when they sort of dug into it, iron air batteries are not very suitable for vehicles or for consumer electronics or for anything else, frankly.

15:29It sort of sat on the shelf, relatively speaking, for about 50 years. And when we were starting Form about seven years ago, we went looking for things that did exist, but which had never been commercialized. And we saw Iron Air and we said, this looks like now there is a killer app. And that killer app is on the grid for much longer duration than any of the other technologies can go after. And it's, again, because of the cost, right? If we need a certain duration to be much longer to bridge those multiple days of intermittency that we face or the weather volatility, broadly speaking, then we have to come in at a much lower cost to get that much longer duration, right?

16:05That's sort of the inevitable trade that you make. And so that's what we sort of picked up off the shelf and dusted off and said, now let's apply 50 years of human knowledge in electrochemistry, right? Battery development, corrosion science, knowledge of iron, right? All these things and go commercialize that battery. Not just prove that the science works, but build a device at Scalibout Manufacturing Facility and keep the cost entitlement where it is and drive performance further than even what they thought they could get 50 years ago. And so that's what we've been doing. That's been the work of the company is to really drive this commercialization of iron air as a chemistry into the world for the first time.

16:42What has the demand for these batteries looked like in the past couple of years? it appears, I mean, especially based on the amount of funding that you've secured, that there is already a serious need for these. Is that what you're experiencing on the sales end? Yeah, absolutely. And of course, the picture changes quickly, relatively speaking. So when we started the company, we said, well, we're going to build a hundred hour battery. That's, you know, one 10th the cost of living mine. And people said, a lot of people said, well, that's, that's not going to be relevant for 20 or 30 years, you know, good luck, right?

17:13It's going to take forever for a market to show up for that kind of thing. And what very clearly fell out of that really detailed analysis that we ended up doing with utilities, by the way, was if you can have a hundred hour battery at the cost point, because those two things go together, then you drive a whole new asset class on the electric system. And there's a huge amount of value right now. You don't have to wait 20 or 30 years. You can address pockets of that intermittency or reliability challenges or whatever else that might be right now, because it's just another cost-effective asset. It doesn't even really matter.

17:47And so that came out very, very clearly. And we started working with these utilities. So our customers are those utilities, right? If you're a customer of a utility, it's probably the name of the utility that you send a bill to every month. This is Accel Energy in Colorado and Minnesota or Georgia Power in the state of Georgia or Pacific Gas and Electric, PG &E in California, Dominion in Virginia. These kinds of entities that are under the way the United States operates these things, they're essentially regulated monopolies. So they have a natural monopoly, right? They run the wires. You're not going to have two companies running wires to your house to compete.

18:22So if you have blackouts, it's their problem, right? They're the operator. They're responsible for it fundamentally. and they have to keep costs under control, right? It's gotta be safe. And increasingly it has to be decarbonized. And so this is sort of the challenge of the last 10 years of the utility industry is to figure out how to solve all that. And now add on top of it, load growth, which is another new challenge, relatively new challenge that the industry is facing, which it hasn't had to face for the last 20 or 30 years, right? Load growth, right? The amount of new demand for electricity has been flat for the last 20 or 30 years.

18:56Before that, it did grow up very quickly. We electrified the whole country in the United States basically from zero, not basically from zero, in the 1920s all the way to sort of the 1970s. There was very quick load growth and then it sort of evened off. So we have built a lot of electricity sort of system capacity historically, but we haven't had to do that for the last 23 years. So load growth on top is a challenge that maybe the electric industry is not used to meeting. It's something that they did me in the past, but it's a brand new challenge. And you mix it in with these other ones of reliability and cost and decarbonization.

19:32And now it's just an even more complex set of challenges that the utility needs to solve. And into that mix, we're introducing a new asset, a new resource, a new tool, if you will, for them to solve all these problems simultaneously. Yeah. I mean, this idea of energy consumption going up and then being flat, and it's just about to tick up again, which I just find fascinating. It seems like it's just because of AI. I did a little bit of research on this in the past couple of weeks and just sort of looked at per capita energy consumption over the past 200 years, basically. And it more or less is an exponential curve.

20:09I mean, this is per capita. It's not that we have more people on Earth. People are consuming more energy. is that just going to continue into eternity are humans just on a per capita basis going to consume more and more and more it's a great question and and part of the question is is that consumption being enabled by low costs right uh you know these things go hand in hand right so if you build the highways wider do more more people just show up right because they they want to use the resource but all of human like modern human civilization is based on low-cost abundant energy that's sort of a fundamental of the civilization that we live in today and where that energy comes from the mix of it has has shifted over the last 200 years so and initially of course that energy was was wood we literally burned through forests of europe that are just now essentially growing back in many ways and and so we started to do fuel switching so we went from wood to coal and then from coal to more hydropower and then ultimately to other sources of hydrocarbons.

21:11And then, and we've been reliant on the hydrocarbons for the last hundred years, maybe mixing in some nuclear in there fairly recently. And then now we're pulling in more renewables. So you do see a fuel switching and the numbers going up because costs continue to go down, right? That is a feature of the energy in the industry more broadly, is that despite all of that growth, despite all of that demand costs, in fact, continue to go down on a real basis. We'll be right back.

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23:27We're back with First Time Founders. I'd love to get an understanding for how you arrived here, and that is at Iron Air Battery Manufacturing, one of the leading renewable energy storage people in the world. Just a little bit of your background. You grew up in Salinas, California. You went on to Harvard for undergrad. You studied economics. Then you made what I would consider a very rare move in the world of tech, which is you went to divinity school. You went to Yale and you were starting to become a theologian. And from my understanding, you wanted to be a priest. Tell us about your childhood and especially about that decision to go to divinity school and perhaps how that may have translated into your career in renewables.

24:09Yeah. So the town of Salinas, where I grew up in California, it's an agricultural community. So we grow lettuce, essentially. That's the primary good there. And that community was totally transformed when they figure out how to ship lettuce from the West Coast to the East Coast. In other words, refrigerated car, or you want to think about it, storage, right? Energy storage. And my parents were public servants, my dad a lawyer for farmworkers, my mom a teacher at public schools for children of farmworkers, essentially. And so I saw also sort of the energy nexus, right? The way that having access to low-cost energy and that being a fundamental building block of civilization, how that intersects advantaged and disadvantaged communities in some very important ways.

24:52And so that has always been sort of a feature of my thinking in general. And I went to Harvard and I studied energy economics largely. And then I actually worked in the tech industry for a few years after that. This was the very first tech boom in Boston in the late 90s, early 2000s, and was largely disaffected with what I saw in that industry. It seemed like it couldn't be real, and indeed that was the case. And so I had a hunger to work on what I felt to be more meaningful topics vocationally, professionally. I like to work. I like to work hard. I want that to mean something. And so I also take my faith seriously, and I wanted to pursue sort of the intellectual aspects of that and was open to becoming an ordained priest, but found out very early on, thanks to the curriculum at Yale, that I'm wholly unfit to be a priest.