The Grid Is Too Small

Zach Dell is the co-founder and CEO of Base Power, an Austin company that installs, owns and operates home batteries and sells the electricity they help deliver. He started the company with Justin Lopas, a SpaceX alum, and Base now designs and builds its own battery hardware in a factory a two-minute walk from its office. Before Base, Dell worked in private equity at Blackstone and in venture at Thrive Capital. He is the son of Michael Dell, whom he calls his hero and his most useful adviser, and he has been starting companies since 8th grade. These signals are from Zach Dell's interview with David Senra on Senra.

1. The grid needs to get bigger. US electricity demand grew at about the rate of inflation for 50 years, and at roughly 2% a year over the last 20. Dell expects that to move toward 10%, a 5x jump on a base as large as the power system. Electric vehicles and heat pumps were adding some load, but AI is now the fastest-growing consumer of electricity and will soon be the largest. "It's not that it's broken, it's that it's too small."
2. Utilities get paid to build. A rate-regulated utility earns a return of around 9% unlevered on the capex its regulator approves, so its only financial incentive is to grow the rate base. R&D spending as a share of revenue is as low as in any industry. Base pitches regulated utilities on being their outsourced R&D engine: better technology so they can add capacity without raising rates.
3. Batteries move energy through time. Poles and wires move power through space; batteries shift it from when it's made to when it's used. The grid is sized for peak demand, so it sits underused most of the day, and low utilization makes every delivered megawatt expensive. On a hot Texas afternoon, Base charges on cheap midday solar and discharges in the evening when people get home and turn on the AC. No new electricity gets made, but the cost per delivered unit falls.
4. Put the battery where the load is. At Blackstone, Dell watched every big private equity firm build utility-scale battery platforms: shipping containers in farm fields. Those assets hit 2 limits, scarce interconnection points and transmission congestion into load pockets like downtown Austin, Dallas and Houston. Batteries on homes sit where the interconnection already exists and where the power is consumed, so both problems go away.
5. A counterposition business model. Existing home-battery companies sell a roughly $20,000 product outright and book the gross margin. If Base sold a better battery 10% cheaper, Dell says, incumbents would copy the product, cut prices and run Base out of business. Base sells electricity, and the homeowner pays about 1/20th to 1/40th of what owning the battery would cost. To match it, a public incumbent would have to tell Wall Street it now makes money a completely different way.
6. Ownership follows the customer. Ask anyone what they want from a power company and the answer is a lower bill and no outages. A battery a homeowner owns sits idle the 99% of the time the grid is up, because homeowners don't trade in wholesale power markets. Base owns the battery, bids it into the wholesale market while the grid runs, and passes part of that value back as a lower bill. When the grid goes down, the home gets backup.
7. One technology stack, 2 business models. About 80% of Texas is deregulated, and there Base competes directly with retailers like Vistra, Constellation and NRG. In municipal and co-op territories it builds battery fleets for the utility, such as a 100-megawatt fleet for the co-op CoServ, which the utility runs through Base's software. Dell calls this "megawatts as a service." The roughly 10-year contracts give Base predictable cash flows it can finance against.
8. Vertical integration is a cost strategy. Electricity is a commodity, and the cheapest reliable one wins, so Base integrates only because it competes on cost. Its in-house battery, the Base Core, has a lower bill of materials, installs faster, puts out more power and lasts longer than the off-the-shelf hardware it replaced. Base had bought out its supplier's capacity and, as of August, was sold out through November. When Dell asked a supplier to spend hundreds of millions on capacity for a startup's forecast, the answer was "Get out of here, kid," so Base put up the capex itself and now keeps the OEM's margin.
9. Depth of integration tracks scale. Today Base designs everything, outsources fabrication, and does final assembly, test and pack in-house. Mining and refining lithium or making cells could make sense in year 30 of what Dell calls a 50-year effort, but not in year 3. He would rather spread across the 4 parts of energy (make, move, store and sell) than go deeper into storage. Base entered through store and sell because they offered the best scale and return on capital.
10. Every conversation is about the constraint. Board member Antonio Gracias opened nearly every call with Dell for 2 years the same way: what's the constraint? Dell and co-founder Justin Lopas hold their 1:1s on Sundays and never discuss what's going well. Inside Base, a literal turtle goes on the desk of the person on the critical path and moves only when the block clears. A "hot potato" squad forms around it, meets daily and emails the whole company weekly until it can announce the problem is resolved.
11. 3 north stars on a poster. Base's yearly goals are the fastest-growing battery fleet, the lowest landed cost per kilowatt-hour, and profitable unit economics. The poster hangs by the office stairs and in the middle of the factory. Every team sits under TVs showing its metrics in green or red, and anyone can call out a dashboard that measures the wrong thing. Each quarter Dell gives a lecture called "Engine of Success" so the newest hires at a 500-person company know how Base plans to win.
12. Writing to think. Base started from a 10-page founding memo, and Dell has written a monthly update for 3.5 years without missing one; he says they double as recruiting and fundraising tools. He keeps a red notebook for working in the business and a black one for working on it. He leaves the office at 9 p.m., and after his wife goes to bed he sits with the black notebook, phone and laptop in another room, until ideas come. He has tried doing this on a computer, and "all the good ideas go away."

Watch the full video at https://www.youtube.com/watch?v=QFk6g5PQtqs.