Chuck Yates Needs A Job

0:00 Andy tell me about Jupiter. So Jupiter is a small IPP independent power producer company. We're kind of vertically integrated focusing on energy storage. We specifically exclusively do standalone

0:18 energy storage. We have nine operating projects about 1500 megawatt hours that we're operating every day in the market here in ERCOT and we're building another thousand right now. That'll be online

0:31 in the next few months. We have about 120 employees. We're based here in Austin and we have an office in Chicago and then a small office in Houston. And we've been operating these projects here in

0:45 Texas. Our first several projects were out in West Texas in the Permian Basin where it's an interesting energy situation, power situation and oil and gas and renewables all

1:02 And we started in 2017 and we've had a couple private equity transactions and we're going strong right now. So walk me through starting a company 'cause I'm looking at the audience and this looks

1:18 like serial entrepreneurs all across the front row there. What's it like to start a company? What do people need to know? Yeah, I loved hearing about your assignments and as folks are going

1:31 through the steps and it sounds like y'all will have a great experience putting your thoughts together about what a new business would look like right now. I've done this three times now and what I

1:46 would say is that it's

1:51 a terrifying thing to do just honestly, first, right up front. I think it's something that you would only do. if you are really driven by a conviction that you have an idea that is so compelling

2:05 that you just can't, each time you think about it, the outcome is this is a good idea. This is a good idea and it's totally gonna work. Even though all of the statistics about starting a new

2:18 business are very challenging, it's something that you really feel like is the right thing for you to do personally

2:29 But it's scary to start a business. It's scary to quit a job and to go out and

2:36 convince a lot of people that a company that does not exist today is totally going to exist, is going to succeed, is going to live on and employ many other people over a period of years.

2:49 It is a wonderful, challenging, terrifying, satisfying, fulfilling and really interesting thing to do. We jokingly used to say it's kind of like being in the Marines. You don't want to be too

3:05 smart or you'll get scared and - Yeah. Although I do say I think the biggest thing is the risk. And I imagine in your course materials, you're learning about just the statistics around new ventures

3:13 succeeding And so if you

3:28 know an awful lot about that, you'd be very focused on the possibility of things not working out. But I really feel like if you really put your thinking through the paces, if you get together with

3:42 a lot of other really smart, really careful people who you trust and build a good team and identify the right resources, it will get off the ground and

3:56 So my bit of advice to an entrepreneur and feel free to criticize it, critique it, however, I've always said to entrepreneurs that I've gone and gotten a beer a million times where the story was

4:14 off. We just had a little bit more money. We could have made it through there. If we'd had a little more access to capital, we could have bought that asset. I've never gone to get a beer with a

4:24 CEO where they said, You know, I just raised too much money. That was my problem, ruined everything. Money was sloshing all around the system. Any truth to that? I do think that

4:39 the people in the startup situation always

4:44 can use more funding. Generally have plans that are aggressive. And I think that's kind of the role for the, you know, the, the, the ventures is to Imagine how much can be done

4:59 and then paired up with the resources. I mean, my philosophy for this kind of stuff is if you're going to do something risky like starting a new business, and it is risky, and in every case, do

5:12 it in the most conservative way possible. And think through all of the decisions that you have to make,

5:21 running out of money is the third rail I mean, you've got to be thinking really several steps down the road,

5:32 and I think all of these decisions that are made in setting up a venture and getting the right team and setting up the business model, the business plan, and making those critical decisions about

5:43 how much money to raise, how much when to raise more money, how to approach those conversations, how to get out into the market, how to put yourself into the market, facts are about your company

5:56 situation that you're putting out there. I mean, each one of those is an incredibly important careful decision. And, you know, I think the real story of any venture succeeding is just a river of

6:10 those kinds of decisions. And each one of them is potentially very consequential. And they kind of all add up to, you know, the story of the company that you're creating One last kind of question

6:23 on entrepreneurship. Is there a story you have or something you learned that was so different than what you expected going in? Is there one of these things that just was never would have guessed

6:41 that in a million years? Yeah, I think there's, I would have a whole category of those. You know, I've learned a lot in this business I was in y'all's shoes, as Michael said I went to graduate

6:54 school here. I was at the law school in the LBJ school. So I'm kind of not an obvious entrepreneur. There weren't courses at the law school that taught this stuff. Although I do think the law

7:08 school prepares you well for business, which is kind of a minority opinion, but I believe it's true. I actually spent a semester at the University of Texas Law School, figured out big thick book,

7:21 tiny print note pictures That was bad, just wasn't my jam. That said, understanding contracts, understanding negotiation, that sort of stuff, is very helpful in business. So I agree with you.

7:37 I mean, I think if one way to conceptualize the job of an entrepreneur is to really carefully assess and manage risk from the beginning to the end, all the way through.

7:51 And I do think lawyers are very keenly attuned to that. Maybe too much. Maybe a semester was the right amount of time. But that's my argument for lawyers being actually better entrepreneurs than is

8:05 popularly thought. But in terms of things that I learned that were true, that really surprised me, one of them was that when you're getting off the ground, when you're getting your new venture out

8:17 there and trying to raise money, one of the biggest problems that you can have is not asking for enough money. That really

8:28 took me a long time to fully understand. There are classes of professional investors out there that are, all they do all day long is deploy tens and hundreds and millions of dollars and much more

8:41 than that. There's a much different group and a tougher group in many ways that you can raise lesser amounts money from. And so often, I mean, you can kind of de-risk your business getting up and

8:57 running if you actually can put a lot more capital to work. And that was a very counterintuitive. I think most entrepreneurs are like, how can I get away with taking on as little investment as

9:10 possible? I mean, I have this incredibly difficult task, which is raising enough money to get my business going. And so I think people are often in kind of a defensive crouch as the entrepreneur,

9:22 trying to get by on as little as they can. And there are certainly benefits to raising lesser amounts of money if you can. But I think if you really think it all the way through, if your business

9:35 idea is big enough to put a lot of capital at work, you can actually have an easier time by looking for larger amounts of money So what was so compelling?

9:49 opportunity wise that you were sitting there in 2017 going, I'm gonna start Jupiter.

9:57 Yeah, you know, all of my career was in wind and then solar up until I started in the late 90s, working on some of the wind projects out in West Texas and worked on that all the way through. And

10:14 many of the wind projects that I worked on out there, some of them are so old now that they've actually been decommissioned, they've actually been, they serve their 20 years under their purchase

10:24 agreement and they no longer exist.

10:27 But the majority of the projects that I've worked on here have been here that whole time and are continuing today. And one of the things that you learn in the course of developing renewable energy

10:40 projects is that it's windy in certain areas. Like Texas is a great example It's very windy in West Texas, you know, we've found windy spots and then we developed wind projects and those projects

10:52 got built and then over time a bunch of other wind projects got built. And what happens when you build a bunch of wind projects in the same areas when it gets really windy, the supply of power

11:03 overwhelms the capacity of the transmission lines to export that power back to load. And so what you see is low prices, although it becomes windy in West Texas, the price of power falls, it's the

11:19 one time of the day when that wind project is going to finally produce energy for sale, and its opportunity gets spoiled by supply and demand. And so the price falls, and even in the way that wind

11:34 economics work, the price can not only fall, not only fall to zero, but it can actually fall to a negative price, where you have to pay to get it on the transmission line And so many of the

11:45 projects that I had developed early in my career, there had been so many projects built that they were experiencing this problem where just for the capacity of the transmission system, there was

11:57 plenty of electrons, they just weren't in the right place and they weren't at the right time to be used in used inner Dallas or South Texas or wherever. And

12:08 that was the genesis of Jupiter as an energy storage company. All of my partners and myself come from renewable energy and we saw this happening with projects that we had developed. And it's just so,

12:25 it's really not good, right, that all of these projects are producing all this power and it's not making its way to market. But it also increasingly seemed like a problem that should be solved.

12:36 And as someone who, you know, arguably, you know, contributed to that problem existing, I felt a real commitment to trying to address it And energy storage is a great way to do this. You know,

12:50 we can soak up electrons when there's a lot of them, and we can make those electrons available when there's not as many of them. And so we're really, that was really the genesis of the plan. And

13:01 energy storage was quite early at that time, but we really had a very clear idea about how this should work in a market like this, how it should work in other high renewables markets. And that's

13:13 what we've been pursuing since then So when you're talking energy storage, what actually is that? Lithium ion batteries? Yeah. You know, there's a variety of different technologies that can store

13:28 power very efficiently. Pump storage is one. I don't know if anyone here has been in the southeastern US, either in the Pacific Northwest. There are a number of really wonderful pump storage

13:39 projects where you basically pump water uphill during the night when energy is cheap and then you flow it down through a hydro generator in the day when energy is more valuable. But you can't build

13:53 those projects really anymore. There are a lot of other technologies, but lithium ion batteries have become the same type that are in your phones and your computers. Those have come very far from

14:06 here at UT, where they were very significantly advanced out into the world. And the efficiency and the rate of improvement of this technology is really extraordinary So we have millions of batteries

14:20 across the nine projects that we operate. They're kind of combined into trays and then racks and then containers. And then all of those are connected by wires. When there's a lot of power, we take

14:31 power from the grid and we charge up all those batteries. And when we need to discharge it, we discharge it individually all controlled through computer systems to discharge power back onto the grid

14:45 Our projects are 5 or 10 acres worth of batteries. altogether. We have a very large project, if any of you were in the Houston area, just outside of 610, off Stella Link at the old HO. Clark

14:57 Power Plant. We built the first phase of several additional phases that are coming along. And so what

15:12 we do is we operate these large battery systems like a power plant. We charge up when there's a lot and then we can discharge, you know, two, three, 400 megawatt hours at a time, which is

15:21 roughly equivalent to a good size natural gas power plant or even a coal plant at a 500 megawatt hour project. So as the income statement, cost of goods, you're literally buying the electricity,

15:38 although it may be negative at certain parts, certain times of day. And then revenue is when you discharge the electricity or.

15:49 Or is that the business model, you're actually a merchant on power?

15:54 The first six projects that we built were at a time - we built these in 2020 and 2021, I believe. And these projects were so early in energy storage being a thing. I mean, storage had existed for

16:12 a while, even going back to the early 2010s But I mean, at scale, really getting going at a gallop. These

16:24 first projects, there was no real market way to transact a battery in a market like ERCOT. There was some very foresightful policy that FERC had pronounced in that ERCOT and in the PC were very

16:38 thoughtful in promoting, making sure that batteries could charge at the wholesale level and discharge at the wholesale level It's a huge policy step.

16:48 but we couldn't, there wasn't a way for these projects to interact in the market other than by basically acting like a natural gas power plant. We could basically buy power to charge as a wholesale,

17:01 as a load customer, but then we could only sell power as if we were a dispatchable power plant. We could only, there's another category of things that batteries can do and that's help the grid

17:14 operate efficiently We can help manage the frequency. All the grid is is electricity transmitted at a certain frequency and ERCOT that's 60 Hertz. And so storage is excellent at discharging a little

17:27 bit or charging a little bit and helping the grid maintain that 60 Hertz frequency. And so we could also sell, these are called ancillary services. We could sell ancillary services. Even that we

17:39 had to act like we were the main people that sold ancillary services were natural gas power plants. there weren't contracts that we had to just operate out on the market in kind of this camouflage

17:52 and until rules have evolved and now they've evolved quite a lot and now there's contract structures and all kinds of things. But back then it's to say that the only way that we could get these

18:02 projects out there was to build them merchant. We had to build them on balance sheet and then we had to operate them in the way that I'm describing. We learned a huge amount doing that. We were

18:11 among the

18:13 first parties to do this and

18:19 times have changed quite a lot. Now there's a lot of contracted structures and some very interesting innovative contracted structures that we're using. And now we're building our first projects now

18:29 in a couple other markets around the country. And we're seeing whole different use cases emerge there. So my dad is the guy that buys new technology the day it comes out and then never upgrades. So

18:44 we probably have the first VCR ever built in America, my house somewhere. And so I come over to my parents' house one day and I'm the vacant lot next to their house. They have all these solar

18:56 panels. And I go, Dad, what's that? And he goes, Well, I bought solar panels. And I go, How much did that cost? And he goes, 125, 000 dollars. But I never have to buy electricity ever

19:08 again. And I'm like, Did you do any math on that dad? And he goes, Yeah, it's a 122 year payback And I'm like, You're 80. I want you here for payback, but I don't know how this is gonna happen.

19:21 So winter storm, Yuri hits. And of course, my power goes out. So I show up over at my parents' house. I've got a bag under one arm. I've got my cat and a carrier under the other arm. Yes, I

19:32 have three daughters. I bribed my daughters to come see me by having a cat. And I show up over at my parents' house. My dad's sitting there reading the paper. He didn't even flinch on the paper

19:42 That 122 year payback doesn't sound so bad, right about now does it. But I tell that story because

19:53 five, 10 years ago, we were in the middle of electricity demand being flat. I mean, if you look from, call it 1950 to 2000, I mean, power usage was what, 15X, something like that, 'cause we

20:08 developed all this cool stuff, lights, computers, air conditioning that needed power. And then from 2000 to

20:17 maybe like a year ago, power demand was flat. Now you have Elon Musk saying we're gonna use 3X, the power, AI is gonna take all this. How real is that? The power demand coming. Yeah, this is a

20:32 huge topic these days. And I imagine everyone would be familiar with the idea that, as awesome as AI is, it - it consumes the AI data servers consume vastly larger amounts of power than even all

20:49 the servers that power the Instagram and the LinkedIn and the everything else that everybody has. I mean, the carbon footprint of the things that we do with our phones and our computers is

20:60 unbelievable. And I don't think many people fully realize exactly how big that is. And as big as it is now, you can look at every grid system across North America and their forecasts. And they are

21:14 completely through the roof. Urkhod is a great example. Urkhod on the hottest day last summer, we consumed about 85 gigawatts of power. That's kind of our peak system size here. Urkhod's own

21:27 projections, which they've - there's a lot of methodology

21:33 matters to understand it very well. But we're looking at potentially doubling the size of Urkhod.

21:40 So every power plant that's ever been built here in the history that's operating right now, building one of those again over the next several years.

21:51 There's a lot of questions about exactly how much of this is gonna come to pass. But it's not just ERCOT, it's PJM, the biggest grid in the country. It's CERC, it's New York, it's SPP, MISO, I

22:06 mean everywhere And so where is all this power gonna come from? The way that you develop a power plant is you get your rights together and then you ask permission to connect to the grid. And then

22:19 that takes six or seven or eight years depending on where you are, shorter often here in ERCOT. And so for a long time, all that we, the most competitive power sources have been solar by a mile,

22:33 wind, batteries have become very efficient, Natural gas has a hard time competing. a nuclear and even harder time competing for a new construction. And so where is all this power going to come

22:44 from? Well, the stuff in the queue, the stuff that has been patiently waiting, is solar, storage, wind, and a little bit of gas. Gas is a natural gas power plants are dispatchable. You can

22:56 turn them on. You can turn them off. Turbins are gas turbines, which is what you generate electricity with burning natural gas with, or the lead time is, you know, you can read in the paper

23:07 every day. It's a different, you know, six years, 10 years, 15 years for new gas turbines. There is so much demand for power and there there is a process that we have for new power showing up

23:19 and it's, you know, a certain technologies. There's a lot of demand for other technologies to come along. And I would say it's it is a crazy time because for many years we existed in a grid with

23:33 no low growth, no generation growth, just a lot of change over. with the energy transition. But what we're looking at in the next three, four, five years and on is a completely different animal

23:45 that many of you will find attractive entrepreneurial opportunities associated with, I predict. Yeah, my running joke is always when you start playing around with AI and you get out of the bar and

24:04 you go to Taco Bell on the way home and you get home and your toilet knows to be seated, we're gonna embed AI in everything we have. And just a typical AI search on chat GPT is five to 10x the power

24:22 usage of the Google search we were doing three years ago that we thought was the most amazing website ever and now it sucks. This doesn't even have AI embedded in it. And so,

24:36 Is this hyperbole when I say this, I actually think AI is gonna be so incredibly important from a national security point of view that if we see this to China or any of the other adversaries out

24:52 there, we're gonna be in really big trouble. And I think ultimately to maintain that lead in AI, it's gotta come back to energy here in the United States and we've gotta solve these problems Yeah,

25:06 it is a huge strategic priority and the main input is power. And this situation that I'm describing, where it's very challenging, especially if you're gonna start picking and choosing, if you're

25:21 gonna say, No, I don't like wind, this

25:25 about this technology, this about this technology. And especially if you then throw in a very challenging and ultimately pretty adverse. landscape, policy landscape situation, on what are major,

25:40 long-term, huge capital commitment decisions.

25:46 It is such a jumble of conflicting directives. I couldn't agree with you more that it's absolutely essential that we advance this I also think a point

26:04 that Professor Weber has made in the past is that we're going to be enjoying the fruits of this technology. It will hopefully help us get better about the way our electricity system and many of the

26:18 other challenges that we're facing. It will hopefully really strengthen our hand at addressing all of these things. But if we can't get a lot more power quickly, it is the primary input apart from

26:30 chips into this stuff working and It's a really challenging picture to move from where we are

26:40 very quickly to where everything suggests we need to be. From my perspective, we need all of the above.

26:49 We also need this power to be cheap. The cheapest power you can get right now is solar and wind, batteries are excellent, transmission is amazing. Gas is still expensive Gas still has a commodity

27:05 input that will have to be managed. But we need power for all this stuff. We need power for organic economic growth. We need power for schools, for hospitals, for the University of Texas. We

27:20 need to somehow do all of this, do it well and do it quickly. And it's a big challenge. And I think the other thing to layer on top of it that's underappreciated is a lot of this, you just have to

27:34 build stuff. You have to put wires here. And potentially, we need longer transmission lines than we've historically used. And it's almost impossible today in the regulatory environment in the

27:46 United States to just build stuff that crosses state lines. I think we forget about that being in Texas, having Urquhart our own grid. Yeah, it's totally true. I'm frequently reminded we're lucky

28:01 enough to do business all around the country I've done a lot of work here in Texas and in Urquhart in particular in Texas. And I'm a big fan of Urquhart in terms of how it manages key processes. And

28:18 when I put it in comparison to the way that many other grids

28:24 manage the process of new generation connecting, for instance,

28:32 things function very efficiently

28:36 It's a real challenge. I think all of the balancing, all of the factors that need to be addressed for something big to get done. One of the most challenging things is unfortunately new transmission.

28:51 We've seen some really amazing efforts at getting big interstate transmission built over the last 20 years. And it's one of the lowest hanging fruit, getting these lines done. And yet from a policy

29:08 perspective, a permitting perspective, a political perspective, it's proven very challenging and it's very frustrating because we could be seeing a lot of progress quickly with large scale

29:18 transmission advances. So five years from now, the institute finally gets over my Taco Bell joke. They invite me back. We're doing this again in five years What are we talking about in five years?

29:34 that's not even on the radar screen today. Yeah, it's a great question, and I don't know

29:46 that you'll love my answer, but

29:50 all of us are so, there is so much interest

29:55 in doing something other than

30:01 some of the things that we figured out already that worked really well. I think there is a tendency to really think that a lot of these problems that we're looking at can't be addressed unless we

30:14 have some big scientific breakthrough and something else. There's a lot of discussion, for instance, around SMR, small modular reactors, for instance. There's a lot of work, and I'm a big fan

30:26 of all of this work, and I'm a supporter and I'm positive about it, and I really hope that a lot of it is successful, What I really hope that we're among the things that we'd be talking about five

30:39 years from now is that these things that we already, these technologies that we already have, that we have seen plummet down the cost curve like falling off a mountain,

30:51 wind first, solar next, batteries next, are going to continue to fall and get cheaper and cheaper and are going to be much more deployable, much more quickly,

31:05 much in much broader commercial context because they cost less, they need less money to pay for them in different contracts and market settings. And they are going to slowly and then quickly grind

31:20 out a lot of the solutions that we need in ways that I think people don't think is possible today. But when I roll the clock forward, the one thing that I've seen in the 25 more than 25 years

31:33 involved in renewables and now energy storage, is that one of the most durable dynamics is this stuff getting better, getting cheaper, getting more reliable, getting more efficient, getting more

31:45 energy out of the same resource. And I think that's gonna continue. I think it's gonna strengthen. And I think we've got the tools broadly. I hope that pool expands. I hope we see even better,

31:58 newer, cheaper, safer technologies emerge But even if they don't, I think we've got what we need and we need to work harder, be more creative, more thoughtful, and push those further into the

32:11 markets. You know, I'm an old oil and gas guy, and we used to always say nothing cures high oil prices like high oil prices, you know. Nothing cures low oil prices like low oil prices. And so I

32:24 think you're right. I had the head of AI for Intel on the podcast.

32:31 And one of the things we were talking about is the rise of AI and how much power is it actually going to use? And he says, tell me how much you're going to charge me for the power. And I'll tell

32:39 you how much I'm going to use for it. So there's definitely a lot of truth. The one thing I think we're potentially talking about in five years that's maybe not on the radar screen. And believe it

32:50 or not, this ties back to energy. It's just the rise of robots. I truly think we're going to see a world where robots are farming all our food, et cetera. And ultimately, at the end of the day,

33:05 to manufacture the robots as well as run the robots, we're going to need a lot more power. I can't disagree with that. It seems to be coming. And electrification of everything is running at a

33:18 gallop right now, too.

33:22 All right, students, you got questions?

33:26 You either come to the mic or be loud, whichever one

33:36 Yeah, my name's Andrew Iggdahl. I'm also at the LBJ school. So we talked about, you guys talked about permitting and the need for transmission. It seems to me that the sort of plummeting down the

33:49 cost curve of a lot of these technologies is why we need more transmission. And so,

33:55 and I'll do respect, I'm not kind of satisfied with that answer to the five year question What do you see needing to happen in five years for us to be able to expand transmission so that we can take

34:06 advantage of the plummet down the cost curve? Thank you. Yeah, it's a great question, you know, there are some very, very vexing, challenging federal and state policy issues. You know,

34:19 Michael Skelley down in Houston, a good friend of mine has been working on, you know, large scale interstate transmission and all kinds of creative applications of transmission.

34:31 It's been a hard road. You know, when a lot of this gets politicized, which is really unfortunate, I couldn't agree more that meaningful progress in large-scale continental transmission and even

34:47 intercontinental transmission would be so incredibly helpful to get us from where we are a lot further down the field. You know, what needs to happen? I mean,

35:01 there are very challenging state and federal clearances that need to happen and we need some consistency, federal policy in particular, but also, you know, some hard political decisions around who

35:16 gets to decide what with this power line crossing this state, there's divisions between where the benefit is of the generation and where the load being served is located, Those do not always. you

35:31 know, distribute, you know, across state lines and in the ways that different states would like that to happen.

35:41 You know, I don't have a silver bullet, but man, if we can't, if we could solve that, we would see a huge amount of progress very quickly. And I'd love to see that. I'm gonna go out on the limb

35:54 and actually make a prediction. In the next 12 to 18 months, you will see a bipartisan agreement at the federal level on permitting. There is a nothing the way because, you know, John Arnold's

36:08 view is we could attack, if we did long range

36:15 transmission, we could actually have solar in Texas, powering California at night as the sun went across And so I think there is a coalition to be built

36:31 Texas energy folks, an environmentalist, that we're gonna be able to actually get this done. Joe Manchin, the Senator from West Virginia, tried this on his way out and actually got close,

36:56 Hi, my name is Rob Cassin. I'm a mechanical engineering school student here at UT and I wanted to ask about the expansion of your existing projects and with this growing demand, do you project to

37:08 be able to expand the projects you already have in the pipeline that are already under construction. Do you see land procurement or transmission infrastructure being the main limiter of your ability

37:19 to do that and how is that playing into your overall five year plan Yeah, we have a saying which is the easiest project to build next year is an expansion of the project that we built last year.

37:34 Because you know the land, you know the interconnection, you know, you know, broadly a lot about the asset. And so any time that we build a project, we try to secure additional land and kind of

37:46 plan for the growth of additional phases if the opportunity presents And we're doing that with a number of projects right now. And

37:58 storage is so modular that it's really suited for that. A lot of times, with a wind project, you're building out with the original project, all of the export capacity on the line. It's different

38:11 in the way that we're able to site storage projects because they're so compact geographically. I mean, five or 10 or 50 acres seems like a lot of land, but compared to 10, 000 or 20, 000 for a

38:22 wind farm, like I'll take it any day. And so it provides a lot more opportunities like that. So we definitely think along those lines. I'll follow up real quick with a question, because I've

38:34 always

38:37 wondered this. When you're financially modeling out your project, are you sitting there looking at the future price of power, ie. what you can sell it for, and then modeling out what you can buy

38:51 it for and are you able to make appropriate turns on simply that for construction, or do you need to depend on the volatility of, we're gonna have that price spike when Winter Storm Yuri hits, or

39:06 we know 12 days a year, we're gonna get close to that 85 gigawatts. What kind of risk am I running as the finance person? Yeah, it's a great question. Energy storage being so new, these kinds of

39:22 things about what's in the financial model And even more, how can we communicate with lenders about what

39:33 the long-term revenue opportunity is for this project had to be built from the ground up over the last five years. And that's why, again, the first projects were built on balance sheet was because

39:45 nobody would, there was no revenue projection. We had to build our own

39:53 way of modeling I'm not a wiggling. how a battery makes money. And you might enjoy this story as kind of one of the challenges of a startup is that when we first began, we had no model for this.

40:10 And we were like, okay, well surely there's something out there. And what we actually thought of was, well, the way that we will run these batteries, the most

40:22 analogous technology is pump storage As I was talking about earlier, you kind of pump water up and let it fall down. And so we actually found a dispatch model for a pump storage project, I think

40:36 that had been built in Tennessee somewhere. And it was this old, it was kind of written on, you know, ledger and so on. Right. And, but that, you know, we kind of used that. We had our own

40:49 thoughts, we put together a spreadsheet. The spreadsheet got bigger. It got bigger. It got bigger It got bigger. It got multiple worksheets. It got. all the worksheets were interlocking, it

40:56 got to be so massive that it would take three or four days to run and it would bust all the time. And this was because none of us in the original group had any programming skills whatsoever. Like we

41:08 had a couple MBAs and they knew how to use Excel, but like this was 2018,

41:14 2019. And so we built this beast that was just horrible. I mean, it was just crying out for improvement. But it did the job It did the job that we could put in prices that we'd expect to receive

41:26 every day. And then it would produce a dispatch pattern that would manage the state of charge for the battery. And then we could run that over a year. That was the best we could do at that time.

41:36 We've come light years from that. And now there's a whole ecosystem of consultants and forecasts and a lot of homegrown algorithms and systems and so on. And so now what we get is we get two or

41:50 three or four times year we get a crop of. three or four forecasting services that will all, they will produce forecast forests for each market and we kind of run those against each of the projects

42:03 that we're interested in doing some financial modeling on. And so that's how far it's come in the last five years and that's how we get the inputs. Now we've got 20 years worth of battery revenue

42:16 forecasts that we can buy from third parties that lenders will put some credence in Interesting. Come to the mic.

42:27 Good afternoon, my name's Nate Shume. I met them at the Cone School of Business. In my previous life, I was managing a feasibility study for a grid connected storage project. And one of the

42:35 biggest issues that we faced was this incredible timeline of when we could actually get the batteries based on how much demand there was. And I'm just curious with the larger discussion of critical

42:47 minerals and geopolitics as an individual who manages risk. What do you see as, you know, the biggest risk? Did Jupiter, Jupiter, when it comes to your future supply of battery components and

43:01 the whole discussion of near-shoring and the such?

43:07 You know, I remember where I was when the IRA, the Inflation Reduction Act passed. I don't know how many of you might, but it's a big deal. You may be familiar with the idea that there was a tax

43:21 credit that was invented for incenting early oil and gas exploration and new technologies and so on. And then that got applied to wind and then that got applied to solar. And then batteries were the

43:31 one big energy food group technology that didn't have a tax credit. And then when the Inflation Reduction Act passed that expanded it to us. And so, you know, we kind of joined the rest of the

43:44 party with like, yeah, you know, there's kind of some stability here The IRA is such a thoughtful. piece of legislation because among its really important components was on shore and was kind of

43:58 you could build a new plant that would manufacture batteries and you could earn a production tax credit. You could buy the needed minerals from our allies, from parties that we are interested in

44:12 doing more business with, countries like Chile and Australia and Canada and others. There was really a very thoughtful package for creating a basis for a lot of manufacturing with a lot of run room

44:28 that was going to marry up with the demand for projects all at the same time. You know certainly there are things you can criticize to act for but you know in my opinion it was it was really designed

44:40 to kind of address a lot of the challenges that you're talking about. One of the biggest issues that folks have had is this industry has grown and kind of fits and starts. And energy storage,

44:52 so-called stationary energy storage, is differentiated from EVs, which are, you know, that's kind of the big, where the tail on the dog of EVs in terms of battery technology, RD. And

45:06 so our supply of batteries would kind of rise or fall depending on how EVs were doing. And when EVs didn't do very well, we had kind of a glut of batteries that we could buy And then in other times,

45:18 and especially the commodity price of lithium, there are just all kinds of issues in an immature supply chain that would constrain or then flood our supply. And what we've seen in the last nine

45:33 weeks has been a whole new introduction of policy uncertainty, both around tariffs and around the fate of the Inflation reduction act,

45:45 tax credits and and other factors there. And so, uncertainty is the real challenge with this. I would say that supply in some ways has never been better because there's been a lot of maturation, a

46:00 lot of expansion of the manufacturing capability. And we're seeing really leaps and bounds having occurred since the IRA was passed in domestic manufacturing. Like we're seeing these plants are

46:12 going up, we're having real live conversations with hard delivery dates and prices for domestically produced equipment with some mix of internationally produced equipment, in many cases, but on the

46:25 trail to there.

46:27 And so, from where I sit, it is among the biggest challenges right now is how do you get the supply that you need? And how do you make decisions about projects that we can't build until 26, 27,

46:41 28 with these uncertainties? We have a financial model that drives all these. Well, what am I putting in the - In the equipment cost cell is it is it a 25 tariff? Is it a 50 tariff? Is it a 80

46:54 tariff? I mean during during the third term of the Trump White House Well, it you know one does wonder Like where this all goes and will it settle and will it will it fix at some point? I mean if

47:07 we're only x weeks into this there's Three and three quarters years to go and it'll be interesting to see where the tariff Goes from here, but ultimately going back to the AI in the low growth It's

47:21 it's extremely challenging to meet this strategic priority this emergency power Strategic priority at a time when it's it's it hasn't been harder In years to actually plan for these kind of capital

47:36 commitments

47:42 Hi, so I'm a second year. No pressure, last question. I'll make it a good one. I'm a second year graduate student. I'm working on sodium solid state batteries. So you said you're working with,

47:54 your company is all lithium ion technology at the moment. What has to happen to jump to new technology? Like a sodium battery, potassium, a new cathode? What, from your end, are the metrics you

48:09 use to decide and are you planning that already? Yeah, I should have said earlier when I was talking about this that, I mean, we're totally technology agnostic. We're about building projects that

48:22 provide a good risk return opportunity. We're very eager for new technologies. Among those that I personally am most eager about is sodium-based technology instead of with you. We're having real

48:38 discussions with parties that are producing this, you know, some of the leading lithium vendors are now manufacturing their first and second and third generation sodium systems. And these systems,

48:50 the promise of a sodium-based system is really exciting. It's a series of changes and it's very nerdy to go into it, but I'm really excited about this. It would be a huge positive change. And it's

49:04 exactly the kind of iterative changes that I think we're gonna be seeing It's the same kind of, you know, a lot of this stuff, annoyingly somehow I got out of all the years of school never having

49:16 taken your chemistry class. But all of these changes, solar panels, batteries, many of the issues that like rare earth minerals in wind turbine generation technology come down to chemistry and

49:31 probably no more than with battery systems. But we're seeing so much, so much innovation improvement and refinement. And I don't see that stopping anytime soon. The cheaper this equipment gets,

49:45 the more opportunities we have to fit it into the market and it's a very exciting part of the industry to me.

49:53 One last thing, we didn't get this question, but I've got a microphone. One of the things I'd like to say to everybody in this room that I'm really serious about, that I've seen in my career is as

50:07 energy people, we have totally sucked at telling our stories, talking about what we do, talking about the importance of the industry, and having a really thoughtful discussion about it, there are

50:19 trade-offs. Yes, there are climate issues we need to deal with, but at the end of the day, when energy prices are high, people die. I mean, I hate to be that morbid about it, but it's really

50:31 true. And so everybody sitting in this room, everybody has an iPhone, become a content creator about the industry. talk about what you're doing. I want to hear all about the solid state sodium

50:44 battery. So make some content about it and tell the world what we're doing because it's really important. If we don't solve these issues, one, it has national security issues to it, but two,

50:58 just quality of life is energy. And so we all need to be sharing what we're doing in this every day.