Zach Dell on Base Power, Energy Abundance & Building a Company for Life

David Senra (0:02)

So, out of every single guest on the show so far, yours is the business that I understand the least. So, let's use this conversation as an opportunity to fix that.

Explain what you're working on, and what your mission, and how you're doing it.

Zach Dell (0:14)

Yeah. So, the grid is something in the power system, and electricity broadly is a topic that a lot of people don't understand, and it's pretty common. I think that's because there's a ton of nuance to it, it's a very old system, it's highly regulated, and so it's not something that is a kind of natural, common site, guys. The truth is, our business is very simple. We're in the business of making and delivering megawatts, and our megawatts are the most affordable and reliable megawatts in the world, on the planet. At least, that's our ambition. And our mission is to power human prosperity by driving energy abundance. And we look to a very simple correlation between consumption of energy per capita and GDP per capita.

And the takeaway is that the more energy a population is able to consume, the better their life gets. And so if you can make megawatts, gigawatts, terawatts, more affordable and reliable, it's the best way to make people's lives better. And that's a mission that we have all rallied around and gotten super passionate about.

We think about things in terms of a mission, a vision, and a strategy, right? So the mission is why are we all here? We're all here to fix the grid and deliver affordable, reliable power and promote human prosperity by driving energy abundance.

David Senra (1:27)

Before we go further, explain why the grid needs fixing. What's the problem with it now?

Zach Dell (1:31)

It's not that it's broken, it's that it's too small.

David Senra (1:34)

How could something as important as electricity and power not be something that we can scale? How do we get into the situation we begin with?

Zach Dell (1:41)

I think because capitalism hasn't been able to work its magic on the industry because it's highly regulated. The companies around it, that have built it, don't have an incentive to innovate.

They're rate regulated and they get paid on CAPEX, not on R&D.

The amount of money that they spend on R&D as a percentage of their revenue is as low as any industry you'll ever find. They're not engineering-led organizations, they're kind of project management and CAPEX-oriented organizations. There has not been a bunch of innovation and how can we scale our capacity to consume electricity? It's just like, how do we go build as fast as we can and earn a return on that building? We just change that. We are an energy technology company that is R&D-driven, engineering-led and technology-focused. And we are going to build technology that allows us to scale our consumption of electricity, deliver more megawatts that are reliable and affordable and help meet the moment of the inflection and electricity demand.

David Senra (2:39)

Okay, so that's why you were talking. That's what I was thinking. I was like, okay, so this is a huge surge that will continue. We need more power and electricity because of everything going on with AI.

Before that, was there any other inflection point? Or did the demand for electricity in the United States just grow linearly?

Zach Dell (2:57)

Over the last 50 years, demand for electricity in the US has grown at basically the rate of inflation. So it has not really grown much.

David Senra (3:07)

So this is a one-time-in-history problem it's having right now.

Zach Dell (3:12)

I think that there was underlying growth coming, or at least starting to come from the electrification of transportation and electric vehicles.

But that's played out less quickly than some might have thought. I think that will continue to play out as the cost goes down. And things like electric heat pumps and electrification of heavy industry will drive electricity demand, but the AI infrastructure buildout has massively accelerated it.

David Senra (3:34)

Can you explain how big the demand is for electricity for AI?

Zach Dell (3:38)

I don't even know. I hear about it, but I don't know. The way to think about it is over the last 20 years, electricity demand is going at roughly a 2% compatible annual growth grade, and we think it will go to somewhere on the order of 10%, which is obviously a 5X, which on a base as large as energy is really, really, really big. Okay.

David Senra (3:53)

So then go back to the mission.

Zach Dell (3:55)

We think about it in terms of the mission, the vision, and the strategy. The mission is why you're here. We're here to promote human prosperity by driving energy abundance, which basically just means deliver affordable and reliable power. The vision is, what does that even mean? What does that actually look like? What that looks like is the modern power company of the electric era. We think that there's a generational paradigm shift happening in the energy industry where the last five decades of energy were defined by coal and then natural gas as the marginal megawatt, and the next five decades will be defined by solar batteries and software.