Entrepreneurs
3 Curated Dialogues
Zach Dell
Key Views & Dialogues
Building a Power Company for the Next 50 Years | Zach Dell, Base Power
US electricity demand could rise from roughly 2% to around 10% annual growth, with AI accelerating an already broad electrification trend. Base sells electricity rather than $20,000 batteries, owning distributed assets that monetize wholesale markets while avoiding interconnection and transmission constraints; scaling Base Core and long-term utility contracts remain key milestones.
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- Zach Dell’s core thesis is that US electricity demand is inflecting from approximately 2% compound annual growth over the past 20 years to roughly 10% — “5 times, which on a base as large as energy is really very, very large” — with electrification as an undercurrent and AI accelerating it enormously. Base Power is using its existing and planned technology stack to meet that demand: “bringing power to compute and bringing compute to power.”
- The grid’s problem isn’t decay but size: “It’s not that it’s broken, it’s just too small.” Dell attributes weak innovation partly to regulation: regulated utilities earn a regulated return, usually around 9% without leverage, on approved CapEx rather than R&D, so their financial incentive is to grow the rate base. Base’s engineering-led response is that “poles and cables move energy through space, and batteries move it through time,” flattening demand on a grid designed for peak load and often under-utilized.
- The business model is deliberately counter-positioned against incumbents selling $20,000 home batteries at high upfront margins: “I don’t sell batteries. I sell electricity.” Base installs, owns, and operates the battery, uses it as a wholesale-market asset when the grid is up, and shares the resulting value through a lower bill; customers pay “1/20th or even 1/40th” of outright ownership. Incumbents would have to change their business model to respond, something Wall Street generally dislikes. “Your margin is my opportunity.”
- Distributed architecture avoids the two binding constraints on utility-scale batteries — interconnection capacity and transmission congestion — by deploying where load and interconnection already exist, an insight Dell drew from studying the sector at Blackstone. One technology stack supports two models: direct-to-consumer retail energy in deregulated Texas, where 80% of the market is deregulated, and “megawatts as a service” for regulated utilities and co-ops — including a 100 MW fleet for CoServ. Regulated projects use long-term contracts, often around 10 years, to provide financing certainty.
- Vertical integration is a cost weapon in a commodity business, embodied in Base Core, a custom battery designed and assembled across the street from engineering because Base outgrew its supplier — “we’re booked solid until November and it’s only August.” Dell says integration has diminishing returns at smaller scale but becomes more attractive over time: “In the third year, it doesn’t make sense… In the year 30, it’s almost certain that it will.”
- The operating system draws on SpaceX and Tesla alumni and board member Antonio Gracias, whose conversations during his first year or two repeatedly returned to one question: “Zach, what’s your limitation?” Tools include three North Stars — the largest and fastest-growing distributed battery fleet, the lowest landed cost per kWh, and financial sustainability — plus a physical turtle for the critical path, “hot potato” squads that work on constraints until resolved, and green/red metric dashboards.
- This is explicitly a forever company, not a start-scale-sell play. Dell frames energy as four things — “produce, move, store, and sell” — with Base starting in storage and retail, and a mission that “will probably outlive the company and me… this company will last until the end of the universe.” His father Michael Dell — “the Dad Terminal” — remains his primary strategic sounding board for building a vertically integrated, capital-intensive, consumer-facing hardware company.
No Priors Ep. 136 | Base Power CEO and Co-Founder Zach Dell
Base Power is vertically integrating residential backup in Texas—designing, manufacturing, installing, owning, and operating batteries while selling household electricity—and says customers save 10–20% monthly. Software and time-shifting could lower bills while unlocking 300–400 GW of latent US grid capacity, but scaling depends on talent, its first Austin factory, and the $1.3 billion raised to start a cost-and-scale flywheel.
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- Base Power’s wager is that vertical integration can turn residential backup into a lower-cost utility and, eventually, “the world’s largest distributed power plant.” In Texas it designs, manufactures, installs, owns, and operates batteries, then sells household electricity: the fleet serves the grid when available and backs up homes during outages. Dell says customers save roughly 10–20% monthly, while software monetization and successive hardware generations should push bills lower.
- Dell argues that the US has substantial latent capacity before it runs out of electricity. The grid peaks around 700 GW but averages closer to 300 GW, leaving roughly 300–400 GW accessible through time-shifting—and potentially up to 700 GW if peak demand approaches 1 TW. “Batteries move energy through time,” letting software align supply and demand without immediately rebuilding the entire grid.
- Solar plus storage is Dell’s thesis for the next five decades, while nuclear remains a hoped-for but currently too-expensive alternative. Gil presses him on Chinese subsidies; Dell credits capital investment spanning subsidized Chinese companies and US and European firms, with solar already about 20% of Texas’s fuel mix and closer to 30% in California. Nuclear is not “dead in the water,” but must become much cheaper and faster; Dell thinks solar-storage deployment might accelerate enough that nuclear economics will not make sense.
- The worsening cost center is moving electrons, not producing them. Generation costs have fallen substantially over 20 years, largely through solar, while delivery costs have risen because infrastructure is aging and regulated utilities earn returns on capital expenditure—an incentive “to build instead of innovate.” Dell’s remedies are faster permitting and interconnection, more competition, and price signals that compensate customers for shifting consumption.
- Cheap power should pull AI training and heavy industry toward low-cost regions and energy hubs. China currently has the advantage because it built nuclear, solar, wind, batteries, and high-voltage transmission; Dell expects highly energy-intensive workloads to converge around Texas and the Gulf, citing Stargate in Abilene and announced Gulf projects. Five-times-cheaper desalination could also turn an emergency tool into routine infrastructure.
- Base’s near-term constraint is talent, with demand exceeding capacity. The company has grown from 10 to about 250 people, is standing up its first Austin factory, and says it has more demand than it can serve; early leaders from SpaceX, Starlink, Anduril, and Tesla still perform individual-contributor work. Its candid operating formula is “urgency and focus”: Dell says Base “probably” works more than 996, but ruthlessly prioritizes visible north-star metrics.
- The $1.3 billion raised in roughly 18 months is intended to start a cost-and-scale flywheel, not finish the mission. Paying 5% rather than 10% to finance the same asset permits lower prices, but Dell calls $1 billion merely “the ante to sit at the poker table.” His decomposition is explicit: technology and innovation deliver 90% of cost reduction, capital another 10%—and in a commodity market, “there’s no sexy electrons.”
Zach Dell - Powering the Future - [Invest Like the Best, EP.434]
US electricity demand could accelerate from a 2% to a 10% CAGR as EVs, AI infrastructure, and industrial electrification collide with a 5-10-year interconnection queue. Base deploys batteries behind existing meters for $500 upfront plus $16/month, targeting a 4-year unlevered payback while utility partnerships could temper volatile merchant energy revenues.
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- US electricity demand is inflecting from a 2% to a ~10% CAGR — “broadly consensus,” Zach says, and “could be much higher” — driven by EVs, AI compute infrastructure, and industrial electrification. His dinner-party test: people guess 20-40% of new US cars are electric; the real answer is 7% (Europe ~25-30%), and he sees that going to 30-50% within five to ten years. Supply can’t respond: the interconnection queue holds twice today’s grid capacity, takes 5-10 years to clear, and only ~20-25% of queued projects get through.
- The utility incentive structure is structurally broken: regulated utilities earn a return on equity on CapEx approved into rate base, so they have an “incentive to build, not to innovate” — ~40% of grid infrastructure predates the 1970s, and electricity prices have risen for two decades. The stakes per Zach: “there is no such thing as an energy-rich poor country,” and if the US doesn’t “work maniacally” to drive power costs down, “we’re gonna lose the race in AI, but we’re gonna lose the race in quantum and in biology.”
- Base’s core insight is a utility-scale battery farm “chopped up into thousands of pieces” behind home meters — dodging the two constraints that cap utility-scale storage (the interconnection queue and transmission congestion) by deploying where the grid already exists, co-located with load. The customer pays $500 upfront plus $16/month, saves 10-20% on power, and gets whole-home backup versus $15-30k for a battery or generator — “cheaper than Netflix… It’s like a Costco membership.”
- Unit economics: ~$6,500 net cost per installed battery (after a 30% ITC and the customer’s $500) generating ~$1,600/year in margin — $1,200 of it merchant energy trading at a modeled $40/kWh-year on a 30 kWh pack — for a ~4-year unlevered payback on a 10-15-year asset, targeted to 2-2.5 years by gen-3 in-house manufacturing. At 50% loan-to-value, the 20-30% unlevered IRRs “go up really significantly.”
- The scary variable is merchant volatility: batteries earned ~$100/kWh in 2023 and ~$20/kWh in 2024, with a classic commodity boom-bust CapEx cycle behind it. Zach’s counter: “poles and wires move energy through space, batteries move energy through time” — batteries are fundamentally grid infrastructure, and utility partnerships (first: Bandera Electric, paying for fleet dispatchability and CapEx deferral) add contract-like utility payments alongside merchant exposure, with securitization — the Sunrun playbook — as the long-term financing path.
- China leads LFP production: CATL, BYD, and Gotion are far ahead in LFP — “if you want to buy an LFP battery today you basically can’t do it outside of China” — and US attempts are a graveyard. But Zach calls the minerals scarcity fear “just fundamentally untrue” (citing Tesla’s Master Plan 3), and auto-OEM JV CapEx driving cell costs down is a trend Base benefits from strongly.
- The company thesis is cultural as much as financial: “What SpaceX did to aerospace, what Anduril did to defense, Base wants to do to energy” — an engineering-led, vertically integrated entrant against incumbents where under 1% of employees work in R&D versus 20-40% at tech companies, with a longer-run “Palantir for utilities” play upstream.