Building a Power Company for the Next 50 Years | Zach Dell, Base Power
In a Nutshell
Base Power builds distributed battery fleets on homes and sells electricity as a service instead of selling hardware, capturing wholesale market arbitrage while providing customers lower bills and backup power. The company vertically integrates battery design and manufacturing to drive down landed cost and scale faster than suppliers allow, targeting the AI-driven electricity demand surge. Its operating system emphasizes maniacal focus on three north stars—largest fleet, fastest growth, lowest cost—through constraint-driven problem solving, monthly written updates, and a player-coach leadership model.
These notes were generated by AI and may contain inaccuracies.
Zach Dell explains that electricity and the power system are topics most people don't understand due to the nuance involved in a highly regulated, old industry. The core business is simple: making and delivering megawatts that are the most affordable and reliable in the world. The mission is to power human prosperity by driving energy abundance, based on the correlation between energy consumption per capita and GDP per capita.
The grid isn't broken—it's too small. Capitalism hasn't been able to innovate in the industry because it's highly regulated. Rate-regulated companies get paid on capex, not R&D, resulting in R&D spending as a percentage of revenue that is lower than any other industry. These companies are project management and capex-oriented rather than engineering organizations. Base Power exists to change this by being an energy technology company that is R&D-driven, engineering-led, and technology-focused.
Over the last 50 years, electricity demand in the US has grown at roughly the rate of inflation. While there was underlying growth from electrification of transportation and electric vehicles, plus electrification of heavy industry through heat pumps, the AI infrastructure buildout has massively accelerated demand. Demand is projected to shift from a 2% compounded annual growth rate to approximately 10%.
The mission is to promote human prosperity by driving energy abundance through affordable and reliable power. The vision is to build the modern power company of the electric era, where the last five decades were defined by coal and natural gas as the marginal megawatt, while the next five decades will be defined by solar, batteries, and software. The strategy is developing a compounding cost advantage through vertical integration and technology, since electricity is a commodity and the best commodity is the least expensive, most reliable one.
A new consumer of electricity—AI—has emerged as the fastest growing and soon to be largest consumer of electricity in the world. The company is using technology already being built to accelerate AI infrastructure by bringing power to compute and compute to power. This involves accelerating centralized data center buildouts by deploying megawatts around data centers to offset load and add headroom to the system, and taking compute hardware to the fleet of energy developed.
Generation creates new electrons through solar, wind, gas, coal, geothermal, hydroelectric, and other methods. Transmission and distribution move energy through space via poles and wires, while batteries move energy through time. The grid is built for peak demand, making it massively oversized and underutilized, which makes the system expensive. Batteries increase utilization by charging during low demand and discharging during high demand, flattening the demand curve and lowering total delivered cost through increased capacity factor.
Current battery storage products don't create new electricity—they use existing electricity more efficiently to drive costs down. In Texas, solar production during the day drives wholesale prices low, allowing batteries to charge. When the sun sets and demand rises from air conditioning use, prices increase and batteries discharge. This timeshifts electricity rather than creating it, addressing the curtailment of solar during periods of excess generation.
Zach's interest in batteries stems from an obsession with big, hard problems. Growing up watching his father inflect the PC industry and now working on AI infrastructure and server business, he was motivated to solve problems where larger economic outcomes result from bigger solutions. In college, he worked on converting human waste into compressed methane or biogas for low-cost electricity access. He became interested in solar but recognized the limitation that the sun goes away, making batteries necessary for energy storage.
Early battery chemistries included iron air, solid state, and high-nickel NMC lithium-ion chemistry used in early EVs. In the last five years, low-nickel LFP chemistry has emerged as better for stationary storage due to safety and longer duration. During college, Zach attempted to lease land on Hawaii's Big Island (low-cost land, high-cost electricity) to build a solar array through Solar City EPC, sign a 20-year PPA with Hawaii Electric, and finance with 90% loan-to-value targeting 20% levered IRR.
After the Hawaii project didn't materialize, Zach interned at Blackstone and received a return offer. While there, he studied battery supply chains, looked at lithium mine carve-outs, and saw the firm acquire what became one of the largest utility-scale battery developers. He identified two constraints on utility-scale batteries: interconnection capacity limitations and transmission congestion, where load pockets like downtown Austin, Dallas, and Houston need power but can't host shipping container batteries.
The distributed architecture insight was to deploy batteries where interconnection exists and where load is located, eliminating transmission problems. Studying residential battery companies revealed they sell high-margin premium products ($20,000 home batteries) with upfront gross margins but don't build or utilize them as infrastructure.
The aha moment was that companies in the space focus on the wrong business model—high-margin upfront sales. The counterposition approach is to not sell batteries but sell electricity: install batteries on homes, use them when the grid is up for cheap electricity, and provide backup when the grid goes down. Customers pay 1/20th or 1/40th of outright ownership cost due to the different business model. Incumbents would need to completely change their business model to compete, which is difficult for public companies.
The business model parallels Howard Hughes Sr.'s approach during the second oil boom in Texas and Oklahoma, where he sold advanced drill bits that customers couldn't buy outright—they had to lease them, with the company providing servicing when needed.
The model generates recurring monthly revenue because customers cannot simply purchase and leave. They must pay every month for the service, creating compounding cash flows. This parallels the approach taken in building the current business model.
The business model starts with understanding customer needs. When asked what customers want from their power company, responses typically include lower bills and reliable electricity without outages. The company focuses on delivering these specific outcomes.
Customers purchasing batteries directly cannot effectively utilize them because they lack access to wholesale power markets, are not qualified scheduling entities, have no hedging teams or trading desks, and cannot monitor commodity prices. A purchased battery typically sits unused until an outage occurs, representing a $20,000 investment that only provides backup value.
By owning the battery, the company can deploy it as a wholesale power market asset 99% of the time when the grid operates normally. The value created is shared with customers through lower electricity bills. The asset ownership model exists to deliver the best product to customers, not due to greed or desire for ownership.
Electricity is one of the few US industries that did not fully deregulate. In the late 1990s and early 2000s, California attempted deregulation but the market collapsed when Enron manipulated it, halting further deregulation efforts nationwide.
Texas carried the deregulation torch under Rick Perry and George Bush through the Public Utility Commission of Texas, creating a competitive market structure. Currently, 80% of Texas operates as a deregulated market while 20% remains regulated through municipal utilities.
Regulated areas in Texas include:
- Austin Energy (Austin)
- CPS (San Antonio)
- Georgetown Electric (Georgetown)
Cooperative utilities include:
- Co-Serve
- Pedernales Electric Co-op (largest co-op in the country)
Cooperatives operate as nonprofits for member benefit, with members as owners focused on lowering rates.
The company builds battery fleets for utilities like Co-Serve Electric, including a 100-megawatt fleet with planned expansion. Utilities use these batteries to charge when power prices are low and discharge when prices are high, profiting from the spread and sharing savings with members through lower rates.
The company installs the fleet and provides software (basepowercompany.com/coserve) allowing utilities to monitor their entire fleet, schedule charge/discharge cycles, and use the batteries as wholesale power assets while providing reliability benefits to homeowners.
The company currently focuses exclusively on residential homes, installing batteries on individual homes rather than utility-scale projects.
In deregulated markets, the company competes with retail energy providers and Gentailers including Vistra, Constellation, and NRG. In regulated markets, the company serves as a vendor and partner to utilities.
Regulated utilities with monopoly service territories cannot indefinitely raise rates. Instead, public utility commissions govern what utilities can build and regulate their returns, typically at 9% unlevered on deployed capital. Utilities file rate cases to request permission to build infrastructure and earn regulated returns on those assets.
This structure creates no financial incentive for utilities to innovate or develop new technology. Their only incentive is to increase the rate base size by building more assets.
The company positions itself as a technology partner and outsourced R&D engine for regulated utilities, bringing better solutions that allow utilities to scale infrastructure without increasing rates for ratepayers.
The company operates one technology stack through two business models:
Deregulated model: Direct-to-consumer retail power sales with battery installation, ownership, and operation. The company bids into wholesale power markets during normal grid operation and provides backup power to homeowners during outages.
Regulated model: Vendor relationship where the company builds battery fleets for utilities under 10-year contracts, providing megawatts as a service. Utilities pay for the fleet over time and use the megawatts to manage their systems.
Ten-year contracts provide cash flow certainty for financing highly capital-intensive battery fleet construction.
Zach Dell began studying entrepreneurship as a child and started his first company in eighth grade. He cites his father Michael Dell as a major influence and hero, providing daily learning opportunities through close relationship and business discussions.
The "dad terminal" refers to using conversations with Michael Dell as a business intelligence resource, similar to how finance professionals use Bloomberg terminals. These discussions cover strategic objectives, business challenges, and provide context that informs decision-making.
Vertical integration is pursued specifically for cost competition, not for its own sake. Since electricity is a commodity where the cheapest form wins, vertical integration enables cost leadership in the market.
The founding involved extensive reading, writing, thinking, and deliberation with co-founder Justin, first hire Jared, and early team members Dana and Cole. The company employs crawl-walk-run methodology with continuous iteration, testing, and learning.
The founding belief centered on an energy industry paradigm shift where battery storage would become valuable technology, and building optimized battery pack assembly operations in the US would create strong market position.
Multiple team members came from SpaceX, including co-founder Justin, Andrew, first hire Jared, and fourth hire Cole Jones. The company draws inspiration from SpaceX's culture, operational cadence, critical path focus, and mission-oriented goal achievement.
Current facilities are expanding from first floor occupancy to all three floors. Plans include a new campus near the airport combining manufacturing and engineering functions. The company emphasizes in-person work with everyone collocated to maintain unified culture.
Leadership operates without private offices, preferring to work alongside the team to overhear conversations, remain accessible for questions, and maintain connection with all team members regardless of role or tenure. The approach treats all team members equally in terms of workspace, food, and tools.
Engineers and manufacturing operate in close proximity, allowing rapid iteration between design and production. Engineers can design parts, walk to the factory to observe assembly, identify failure modes, and implement fixes with daily collaboration.
Hiring engineers trained at SpaceX and Tesla provides significant advantage, bringing best practices in hardware product development, manufacturing scale-up, and supply chain management.
The company maintains focus on a small number of clear, company-wide goals with monthly written updates documenting accomplishments, gaps, and next-month plans. These updates have been written consistently for three and a half years without missing a month.
Monthly updates serve multiple purposes: providing cathartic reflection for leadership, creating company historical record, functioning as recruiting tools, and maintaining accountability to stated goals.
Zach Dell started Base Power with a 10-page memo that articulated what the company is, why it exists, the problem being solved, and how it will be accomplished. He writes to think clearly and has always been a writer who loves both writing and reading. Some of the memo culture comes from finance and investing, where getting ideas out on paper is valued.
Zach describes the distinction between working in the business—blocking and tackling, solving near-term personnel problems, product problems, and acute issues—and working on the business, which involves thinking 6-12 months out, strategic wargaming, and chess playing. He carries two notebooks: a red notebook for working in the business during office hours and meetings, and a black notebook for working on the business at home.
He segments his day deliberately, leaving the office at 9:00 p.m. to spend time with his wife before she goes to bed. From 9:00-10:00 p.m., he opens the black notebook with his phone and computer in another room, focusing solely on strategy. Sometimes he has specific tasks like writing an outline for a memo or solving a big problem; other times he stares at a blank page until something emerges. This deliberate allocation of time toward working on the business has yielded some of the best ideas.
Zach finds analog note-taking with pen and paper uniquely clarifying and focusing. Attempts to move to a computer cause good ideas to disappear. He wakes early between 6:00-8:00 a.m. for his most productive time, executing the work assigned the night before. The 30-60 minutes in the evening with pen and paper and no distractions—no notifications, no calls—provides special focus that digital tools cannot replicate for him.
Base Power has three north stars that the entire company focuses on: becoming the largest distributed battery fleet in the world, landing the fastest growing battery fleet in the world, and landing batteries at the lowest landed cost. Landed cost means getting the batteries on the grid on a per kilowatt hour basis cheaper than anyone else. This encompasses materials, hardware, installation cost, customer acquisition cost, overhead, and operations.
The third north star is financial sustainability, which translates to profitability and unit economics. A poster displaying these three north stars is placed by the stairs in the office and in the middle of the factory. At the beginning of the year, Zach sends an email to the team stating that achieving these three things will put them on track toward the mission.
Downstream of the north stars are specific goals that must be accomplished to hit each north star. Everything internally is focused on these north stars. Monthly updates organize the team, and the company maintains manic focus on unblocking whatever is on the critical path toward achieving these north stars.
The turtle is a literal physical device—there are multiple turtles including plush and ceramic versions—placed on the desk of the person whose problem is on the critical path. The turtle can only be moved when the critical path is resolved. When a problem arises, such as a supply chain constraint where a part cannot be obtained at volume, a turtle goes on the desk of the head of supply chain.
A hot potato is a squad that spins up around a problem. A team works on solving it with daily meetings, and a weekly email goes out to the entire company with updates. When resolved, an email announces that the hot potato is resolved, and team members return to their normal course of business. The physical turtle embodies the principle of taking work seriously but not taking oneself too seriously, and people take pride in having the turtle because it signals their responsibility to unblock the business.
Every team sits in bullpen seating with open floor plans, and TVs hang over their heads displaying metrics specific to that team, with good metrics in green and bad metrics in red. The office resembles a Best Buy with TVs everywhere showing company-wide metrics. If a dashboard is not high-signal or is guiding toward the wrong thing, anyone can point it out. Metrics must be super specific, oriented toward the north stars, and very visible and readable. This helps new employees get focused quickly even before they fully understand the mission, vision, and strategy.
Zach gives a quarterly presentation called Engine of Success that explains the formula for winning—the super top secret plan for how Base Power beats the competition. It is designed for the new cohort of people who joined that quarter, from interns to senior people, so everyone understands why they are there, what they are after, and how they will accomplish it. At 500 people and growing rapidly, the leadership cares that everyone understands the broader context rather than simply being handed a desk and a narrow task.
Zach views his role as a player-coach. The coach side involves the personal element of running a company—helping the team do the best work of their careers, working with people, and helping them become the best versions of themselves. He studied psychology in college and enjoys reading behavioral psychology books. The player side means being a world-class individual contributor who can unblock the company and put points on the board. Using a basketball analogy, when the game is on the line and the team needs a bucket, he can score; he can guard the best player on the opposing team; and he knows who to pass to when double-teamed.
Zach's background in investing taught him the art of studying good businesses—what makes a business good or bad, how to predict outcomes, accounting, capital allocation, and capital markets. He is competitive and quantitative. He views accounting as the language of business that one must understand to see what makes a business tick. Investing also involves studying people and leadership teams, skills that directly transfer to entrepreneurship.
Zach's father is at the top of his list of entrepreneurs to emulate. He admires Patrick and John Collison of Stripe for the culture they have built, the pace of execution, and how they have evolved the company from serving startups to enterprises while exploring emerging technologies like stablecoins. He also admires Eric and Kareem at Ramp for building an incredible talent magnet in a category that was not obviously sexy, turning it into something compelling through customer obsession and focus on saving customers time and money.
Brands are one of the most underrated moats in business, as seen with Coca-Cola and Nike. There are no beloved brands in energy, which makes the opportunity unique and counterpositioned. Building the first beloved brand in energy has become a huge advantage for Base Power.
Zach has learned more from people who worked at Elon Musk's companies than from Elon directly. The primary lesson is maniacal focus on critical path and resolving constraints. Antonio Gracias, who has worked closely with Elon for decades and sits on Base Power's board, reinforced this by asking the same question in every conversation for the first year or two: what is the constraint? Conversations stayed focused on identifying and resolving the constraint standing between the company and its mission.
Zach is obsessed with things that last a very long time. Countries last longer than companies, and religions last longer than countries. Companies can learn from religions in several ways: maintaining a shared base of knowledge that everyone owns and returns to repeatedly; gathering with like-minded people at regular intervals; and maintaining the same conversations over and over. The repeated focus on constraints may feel uncomfortable at first because the natural tendency is to discuss all opportunities and fun strategic things, but over time it becomes clarifying and comfortable. Justin, Zach's co-founder, is very good at this focus during their Sunday one-on-ones.
Zach Dell describes how he and Justin deliberately avoid discussing what is going well, stating that the last three years have gone unreasonably well but there is no benefit to focusing on the past. All conversations center on what problems can be solved, what things are being worried about, and what constraints can be relieved. Good news takes care of itself, while the focus remains entirely on forward momentum.
Charlie Munger's "rangutang theory" is discussed, which suggests that an intelligent person can benefit from having a one-sided conversation with a rangutang for thirty minutes simply by organizing their thoughts out loud. This principle applies to using notebooks, monthly updates, and writing clearly to think clearly. Zach writes down good ideas first and puts them in front of his team for debate, stating that writing allows him to gather thoughts and then chew them over with Justin, Jared, Dana, Cole, Dino, Zena, his dad, Lee, Antonio, and other friends who have context or expertise.
The concept of rubber duck programming is referenced, where programmers explain their code to a rubber duck to clarify thoughts through verbalization. Zach applies this principle through his solo podcast, where he often realizes he doesn't actually understand something until he hears himself explaining it aloud. He constantly sends written materials to major investors and calls them in early morning and late evening hours to brainstorm and chew on ideas.
Zach identifies his mutual friend Zach as the most helpful advisor, describing him as not even one of their major investors but a very close personal friend and Base investor who is one of the best business strategists he's ever met and probably the best investor of their generation. A story is shared about arranging for this friend to meet with someone struggling to decide whether to sell one of two companies or focus on one, where within ten minutes the issue was identified and resolved.
Zach's dad is ranked near the top of helpful advisors, with conversations typically lasting three hours rather than five minutes. Other key thought partners include Josh, who worked with Zach for a couple years and is a major Base investor; Brad Gersner, who is called frequently with crazy ideas; Leaf Fixel, whose firm Edition is the largest investor; and Antonio with his partner John Schulen.
Zach's mom is described as being on another level of competitiveness compared to his dad, portrayed as a world-class endurance athlete who participates in Ironman competitions. For each of her four children's birthdays, she rides 100 miles plus their age as a personal challenge and to commemorate their birth. She is described as an intense person with an unbelievable amount of love and affection, an amazing mom and wife, and the secret weapon and engine of the family in a matriarchal family structure.
The Base Core is introduced as their custom-built battery, the output of three years of learning how to install, operate, and manage tens of thousands of distributed home batteries. It is completely designed from the ground up, manufactured across the street with an entirely controlled supply chain, and purpose-built for their use case. The system offers lower landed cost bill of materials, faster installation, cleaner switching, more power output, more energy duration, and is designed to be a grid resource.
The Base Core embodies the strategy of compounding cost advantage through vertical integration and technology. The business moves from good economics installing off-the-shelf hardware to incredible economics with vertically integrated cost structure. The product can scale at an order of magnitude greater than the previous product because the existing supplier was being tapped out, with all their inventory purchased and they couldn't produce more batteries. The company is sold out through November while it is August, requiring them to build Factory 1, Factory 2, and bring on modular lines and invert lines as fast as possible.
When relying on suppliers, companies are at the whim of their execution, but doing it themselves provides control over execution and the ability to meet demand. The capex investment can be made with conviction about future growth. When approaching suppliers three years ago with the vision of being the fastest growing energy company and installing tens of thousands of batteries in three years and hundreds of thousands in five years, requiring hundreds of millions in capex investment, the response would be dismissive. The OEM margin becomes their margin to keep, providing better cost structure and more control over scalability.
The potential for deep vertical integration is discussed, including buying a lithium mine, refining lithium, and making their own cells all the way down to mining. However, there are diminishing but not zero returns to vertical integration, with plateauing or asymptoting returns at certain levels. At current scale, the position of final assembly, test, and pack makes sense, with design done internally and fabrication largely done by third-party suppliers. Over time, economies of scale could justify further integration including cell manufacturing, lithium refining, and mining.
The business is described as a multi-decade 50-year journey. In year three, it doesn't make sense to spend energy thinking about making cells, but in year 30 it almost certainly will. The entrepreneurship ecosystem's focus on start-scale-sell is criticized as perverted, with the statement that exercise strategy should be death rather than selling. Two founders are referenced who exemplify this approach: Scott Woo, who is turning down billions in offers, and Torson Real of Helzing, who states they are not selling for any amount of money because Europe needs its own defense capability.
Zach confirms he is not solving for a paycheck, stating the mission is never-ending: human prosperity, energy abundance, affordable reliable power. The mission will live on forever, probably outlive the company and outlive him personally. The company is planned to last to the end of the universe. His dad's line about caring about the company after he's dead is referenced. The honor of working on this mission with this group of people is described as the blessing of a lifetime, with constant obsession over moving the mission forward.
Energy is described as four things: make, move, store, and sell. Generation must be created, transmission and distribution must move it to where it's needed, storage is required because electricity isn't always used when it's made, and retail energy handles the selling. The company started with store and sell as the best place in terms of scale and return on capital to enter the market, but has ambitions across all four areas. Rather than deeply vertically integrating in year three on storage, the focus is on building great solutions to drive down cost and drive up reliability in make, move, and sell, then pursuing vertical integration opportunities as they present themselves.
The stack developed for make, move, store, and sell will be pointed at AI, identified as the largest and fastest growing energy consumer in the world. Zach confirms this is his last company and he will be doing this for the rest of his life. Future conversations are planned every six months to create an ongoing live history of Base over the coming decades.
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