The Exchanges

Q shocked, um, beyond belief that it, that it was something that, that truly went forward. So you were instrumental to that moment, very much deeply negotiating tenants of the IRA. So can you take us back to that time where you were working with your colleagues Um, what drove you to be so intimately involved in the end, uh, and what was your role in ultimately getting the IRA passed?

A Well, I was, I was very lucky, um, that Joe Manchin took me under his wing, um, because he recognized that I was a former governor, like him, and that sometimes it takes former governors a while to get into the, you know, into the meetings where you're actually having an effect. Um, so he used to have these meetings, bipartisan meetings out on his boat. That's where a lot of the bipartisan infrastructure bill took place and got negotiated. That's where a lot of, uh, the Inflation Reduction Act kind of got its start. And, and Joe Manchin really is a fiscally conservative person, and he's progressive. He believes in an all of the above. He thinks you need natural gas and oil, but you need wind, you need solar. Uh, and so the Inflation Reduction Act owed a lot to the fact that he stayed with it. Now, a couple of times he said he was done. Uh, he said, oh, no, that's too far. I'm not going to go. That's too far. And that's where, and it wasn't just me. It was me. I think Chris Coons, uh, Also played a role in, in talking to him, but I, I had that, that benefit of having been a former governor, and having been pretty close to him, uh, through the inflation reduction, or the bipartisan infrastructure bill, so I would find an excuse to talk to him every single day, and just to check on him, and how was he doing, and if he was really over and gonna quit, you know, he told the press he …

AI assessment note: “I had that, that benefit of having been a former governor, and having been pretty close”

Q like, these are exactly the kind of projects we need to power our data future. Like, this is, you know, just full stop. It's really crazy what's happening. Um, okay, but there was more that you did, too, to help kind of protect some of the, some of the things in the bill. So you had an amendment about that effectively protected a residential energy tax credit. Is that right?

A Yeah, so we, we introduced an amendment to take that part of the Inflation Reduction Act's That applied to residential clean energy credit, um, and it would cover 30% of the cost of, uh, it was purchasing and installing, I'm pretty sure, uh, residential solar, the battery backup, uh, it would allow you to utilize geothermal heat pumps, which actually, it turns out in Colorado and a lot of America, those heat pumps are very useful and cost effective and very, very clean. Um, our amendment would have You know, protected the program from Republican cuts for a year, which would have given clean energy, uh, and a lot of these are small businesses, both in Colorado and around the country, it would have given them a runway to kind of weather the storm that the Republicans were creating, uh, and they could have begun to prepare for the loss of that tax credit support. Uh, and again, that's the net, uh, what we were trying to say was 85,000 jobs, so, and we had bipartisan support, uh, Uh, Susan Collins ended up voting for our amendment, but ultimately it failed. But in the fight for that amendment and, and many of the other ones we put forward, again, we did soften, uh, the final bill in, in a number of, and it could have been much more, as bad as it is, it could have been much more horrible.

AI assessment note: “Yeah, so we, we introduced an amendment to take that part”

Q that pivotal moment from the top of the show, the offsite retreat. Well, first of all, what happened at this team retreat? How did you kind of work through some of these challenges? And I think honestly, you know, telling folks, like, how do you communicate in moments like this of deep tension is really beneficial for folks to hear. But then where did you wind up going from there?

A I think it was really helpful to get out of the office, and we did it overnight. Like, we went and stayed at a little lodge up in the mountains of Santa Barbara. And we had a facilitator come in, and it was a full retreat, but it was really important to get people out of the office and to talk about the perspectives that everybody was coming from, because we had the technical team, I mean, hearing me, but not really hearing me about the expectations that our investors have for us, and, you know, me hearing them on, this is not just another Idea that we're filing IP on to go out and to go block in the space, or file blocking IP, or just cover all the bases, this really solves the core challenges. And around that same time, uh, we brought on our now CTO, Patrick Hanks, who had spent 15 years leading novel process scale-up at Exxon. And so, we were having him come out to interview, and the technical team said, well, I don't understand why we need this new leader. And there was, you know, pushback just to the role, uh, itself really. And then when they met Patrick within a week, they said, this guy's amazing. We should have had this guy sooner. And so, you know, I think there's a leadership component to it as well of, you know, you need a strong technical leader who can go toe to toe with PhDs or has a PhD themselves to be able to explain this is why we're solving problems in, in t…

AI assessment note: “we had a facilitator come in, and it was a full retreat”

Q So, I mean, this sounds like a super ideal solution, that effectively what you're doing then is building the pilot in a way that it's flexible to both approaches. Did that involve a significant cost increase compared to what you were originally planning, or kind of what were the things that you had to do to make that possible?

A It's been a little bit more expensive, and I think that as a result of that, there are parts of the pilot that are not designed the way that we would have originally designed them. So there's a, there's been a little bit of a trade-off there, but One of the things that we're really fortunate to have is that the pilot is at the Southwest Research Institute, which is able to do all sorts of on-site fabrication, like the core reactor vessel was actually built, um, on-site. So, in order to go make changes to anything, we're able to go, you know, have the welding crew come walk up and look at it, get the crane, take the reactor vessel off, take it back to the welding shop, Make some tweaks to it, go back, set it back in the pilot, all with just the folks that they have on site there. So I think one of the things that really enabled that was the flexibility of, ah, of, of Southwest.

AI assessment note: “It's been a little bit more expensive, and I think that as a result”

Q So Graphitic has officially decided to commit to using the new technology, but that doesn't spell the end of the challenges. In fact, it means a whole new set of them. More about that after the break. So, once you're all in on this new approach that you're pursuing, and obviously technique biz as well, what were the things that changed with respect to particularly your products?

A The big change was really around the carbon, and we as a company were slow to appreciate that. I mean, as we were running campaigns in the lab, obviously we're looking at the carbon, Looking at the XRD and say, wow, that's, that's really graphitic. But the carbon that came from the previous approach was, was not, it was basically soot. And so we, all we had really ever thought about in the carbon was, how do we get our molten media back? So we don't have to keep, you know, replenishing that. And it really just was not in the company's DNA to think about that carbon as being a valuable co-product. And so, Around the time that we were finalizing the initial FEL work with Technique, our now CFO, um, but at that time VP of Finance, Steven Swager, who has a product development background, he had previously been the CFO of a carbon nanotube company, said, I don't think we should just assume that this carbon is going to go back into the ground and be a coal mine in reverse. We should get some samples out. So he sent some samples to To his old company, and then went out and recruited the former CTO of the biggest graphite producer, uh, in the United States to come be an advisor and has been able to sort of really help develop that market, um, on the carbon side. And when people think graphite, they usually think lithium ion batteries, but they don't appreciate that there's a tremendous…

AI assessment note: “The big change was really around the carbon, and we as a company were slow”

Q but say a bit more about kind of the, the main goals of the pilot. It sounds like at least one was to generate enough material that you could really get, you know, customer proof points on the graphite side. What else were you trying to do, and how else were you thinking about the scope, like how much engineering scale up you were taking on with that particular pilot?

A Yeah. So, one of the things that was critical to have Patrick lead with the help of TechNeep was, how big should the pilot be? So, my previous comment about, well, we're going to overbuild the pilot, that's just the skid. We just want to make sure that the steel structure has plenty of room to go fit all the different components into it. So, it was really working with Patrick and Technip and also an organization called the Particulate Science Research Institute that's kind of the leader in fluidized solids to say the height of the carbon formation reactor, which is the core vessel, is really determined by the velocity That you need to send all these particles around on, and that's 40 feet, and we knew that from the lab. And then diameter is based on, you need to really get to a foot in diameter with a fluidized bed before you get away from wall effects. So if you can get to a foot in diameter or larger, you can get away from wall effects and be very confident that you can take the data that comes out of that and scale it to whatever diameter that you want. And so, one of the great things about our pilot, there are some not great things, and there have been some challenges too, but one of the great things is, despite that sort of initial flexibility that we built in, we feel really confident that that will give us all the scale-up data we need. It isn't a, well, we built this pi…

AI assessment note: “we feel really confident that that will give us all the scale-up data we need”

Q Okay. And so once you brought him on board, Tell me how the conversation went. Were you basically like, here's the approach we've spent all this money on and are ready to execute on. Here's the approach that the technical folks in the company want to pursue that solves problems. Pick one, or how did that work?

A When Patrick flew out for his interview, he did all his interview prep based on the old approach. So, you know, studying the fluid dynamics of bubble columns, being ready to not just look good himself, but also interview the startup Startup company and say, am I going to go leave Exxon to go work for a startup company that's doing this? Like, is this technology going to work? And so, he got to the office, and the first thing we did was give him a new presentation on, actually, we have a new idea, and we want your first sort of decision to be to help decide if the new idea is better than the old idea. And, you know, he got it. It wasn't instant, But, um, we obviously got him to join, so he, uh, was supportive of the idea, and he said, this is a really elegant solution to the core problem that exists in methane virolysis. How do you get the heat in? So that was one of his, one of his very first things that we did with Patrick as a company was say, hey, this is a good idea worth pursuing, but we still had the pilot. Um, so while this was happening, We had to be building a pilot, and that was part of what we talked about at the retreat, which was we always have to be building a pilot. We've raised enough money, and we've been at this, you know, two years that, like, we have to be pushing that forward, because there are no points awarded for the best idea on a whiteboard. You've got…

AI assessment note: “we want your first sort of decision to be to help decide if the new idea”

Q That's very cool. Ok, so at this point though, are you all in on the new approach?

A We became all in on the new approach. It really took technique energies doing the initial FEL studies, because the devil is in the details. It's not in the chemistry. We knew we could get the chemistry to work, and we knew that because, because it's really a fluidized bed, that we could get the fluid dynamics to work. It was a question of, can you build the flow sheet for this In a way that will make the resulting hydrogen and carbon economical. And so, Technib completed their, uh, FEL-I studies of our technology at both the minimum efficient scale, which is about six tons of hydrogen a day, and also the maximum efficient scale, which is 270 tons of hydrogen a day, which is a world-scale hydrogen plant. They completed those, it looked good, and then they approached us and said, we want to invest in you guys and have a partnership Because we think that this is going to be competitive with blue hydrogen and in parts of the world is going to beat blue hydrogen hands down. And so that was certainly, that was certainly enough of a signal for me to be like, okay, all right, there, we have a good idea here. This is going to work. A company that does a third of the world's hydrogen projects is wants to put some money into this. So that's a pretty big signal.

AI assessment note: “We became all in on the new approach.”

Q with this conversation, Rick and I are basically saying, hold my beer, because we're going to talk about fusion. Um, so Rick, let's get into this. So fusion, obviously really interesting, different technology. Tell us what fusion is. Tell us whether it's actually 40 years away and always will be, as the adage goes, and most importantly, why are we talking about this now at a data center AI conference?

A Yeah, thanks, Laura. Um, and I guess maybe just to set the stage a little bit, like, fusion is different than fission, so at its most fundamental level, uh, fusion is the combination of small atomic nuclei together, which then releases a bunch of energy. Fission is the opposite. It's splitting apart a big atomic nuclei, uh, and that releases energy. Uh, fusion is essentially what you see in the night sky when you look up. Those are stars. Those are fusion power plants all over the sky. Um, what we're trying to do is to bring that energy source, the source of 99.99% of all the energy you've ever experienced. Solar, wind, fossil fuels are all basically derivatives of our local fusion power plant, the sun. We're trying to bring that down to earth and put it in a bottle and then get some heat and electricity out of it. Um, so it's, why is it, you know, why is it relevant now? Why, why are we talking about it now? Because there's been a lot of advancements In fusion, people maybe haven't paid as much attention to what fusion's doing, but over the last 5060 years, its progress on its main criteria, like how much energy you get out versus in, has been faster than Moore's Law. It had a long way to go, but it's been very fast, and the reason that's been happening more recently now is we have a lot more compute and understanding of how do you control a plasma, which is a big soup of char…

AI assessment note: “fusion is the combination of small atomic nuclei together, which then releases a bunch”

Q We're gonna get into all the details around that. First and foremost, though, you all are effectively a startup. I don't know if that's what you'd call yourselves, but you've raised over two billion dollars, which is not typical for climate tech startups. So how have you been able to secure that level of investment?

A Uh, well, I mean, certainly we're going after markets as in the trillions, um, so whether it's the power generation equipment that could be deployed everywhere in the world, or it's the electricity that comes from it, those are big markets, um, but I would say we're also have taken a very thoughtful approach to what is our approach to fusion, and we've decided we're gonna take the most scientifically proven architecture, we've talked more about it, it's basically a magnetic donut called a tokamak, and we apply this key innovation, Much stronger magnets that allow us to shrink that way down so it's actually a device that you could actually build and finance and become a power plant. So just the approach is one thing. I think the other thing where we've been able to raise that, that amount of money has really been relentless execution on the most critical milestones for us to prove that this approach works. From our series A, that critical milestone was build that very, very powerful magnet, which people said you cannot do. There's not enough material in the world to build it. No one's ever done it. It's not going to work. We said, we'll do it in three years. Shame on us. We did it in three years and two months. And by the way, that's in the midst of COVID and supply chain disruptions, that proof of that magnet. Three months later, we raised 1.8 billion series B. And the reason i…

AI assessment note: “Three months later, we raised 1.8 billion series B. And the reason is because”

Q earth shattering for you to show net energy gain. And you're talking about a very close timeline. So get real specific here. Like, how are you going to do it How sure are you that you're gonna do it? Is this still like, you know, there's fundamental science, but you're ironing it out? Is it an engineering problem? What makes you so confident you're gonna be able to get there?

A Yeah, so as, as, uh, Lara, as you rightly point out, there's two ends of the spectrum of how you achieve fusion, and basically, um, fusion, what you need to achieve fusion, and more energy out than in, is basically you need three conditions. You need to be hot enough, and when I say hot enough, it's like really hot, like a hundred, a hundred fifty million degrees centigrade, so hot. Um, you need the fuel to be dense enough, so enough for the fuel around, and then you need to contain it enough, to hold it together enough. Lasers do this by just pounding a pellet so fast as nothing That it can do otherwise than just implode and fuse, right? Uh, magnetic confinement on the other end of the spectrum, what we do, is you actually hold that plasma for longer with a very strong magnet. The magnet makes the spirals that the, the ion, the atomic nuclei do very tight, so it keeps it together, so it will continue to fuse. So, that's the, the differences. Why are we confident in this? Um, our architecture, this goes back to our original, like, why do we raise so much money? Our approach is based off of the most kind of scientifically proven approach To get to a, kind of, a commercially relevant version that will get net energy. And that is this tokamak. So that is a magnetic donut. There have been about a 150, a 160 of these things that have been built over the last 5060 years. They've marc…

AI assessment note: “Our approach is based off of the most kind of scientifically proven approach”

Q And Rachel, can you dissect that blended capital stack a little bit more and talk about why that makes these deals so much more complicated?

A The variability of how you can structure rooftop solar and storage differs greatly. You could, you could put together 10 different models to finance the same deal. The distinction is that everyone takes a little piece of the pie, and it's relative to their risk profile, it's relative to How much capital they can put up, what their rates are, what their margins are, and what their overhead is. And for a lot of these projects, somebody's coming in with working capital, whether it's the developer or the business owner or the nonprofit that has that asset, and they're saying, okay, I'm gonna cover this amount of, with my own, ah, cash, and I'm gonna, I'm gonna cover my pre-development costs, which is super risky. And then people think, oh, okay, well, I've got direct pay, which is a tax credit. Well, someone's got to pay up front against that tax credit, so already we're looking at a bridge to that tax credit, so two things have to be true already. The third piece is you've got a mini perm, uh, debt portion of this that's a five-year repayment if you're able to line up the bridge financing, and so all of a sudden three things have to be true at the same time. So it's not a one-to-one. It's not one product. It's that all three things have to be in coordination in order for that deal to pencil. And insert the blank, a credit enhancement, a tax incentive, a rebate program, uh, subordi…

AI assessment note: “It's that all three things have to be in coordination in order for that deal to pencil.”

Q And let's talk a little bit about the offtake you had for this project, because you signed a pretty interesting and sort of first-of-a-kind agreement to make this happen, right?

A That's right. So I've already talked about the main component, which was, you know, we're gonna go build this two-well subsurface test system. We're gonna sell the grind to an existing operator. But to sort of sweeten that deal, we said, Ok, and then we'll bring an off-taker on the back end that can sort of account for any power uplift that is coming onto the grid that's additional. And so we ended up, you know, landing Google for that contract, and Google said, we are also not going to put anything at risk, but in the event that you end up producing electrons from this system, we will pay you for those electrons. And so that was sort of the deal that we struck with them.

AI assessment note: “we ended up, you know, landing Google for that contract”

Q rest for the weary. And so, of course, as you all are working on and building Project Red, you're also actively working on the pipeline of projects you have in store. So can you talk a little bit about what you were thinking about the next project to follow Project Red? When did you actually start sort of contemplating and scoping what that would be? Tell us about that moment.

A Yeah, when I joined Firvo in the middle of twenty-twenty, the team already had a pipeline of 15 projects, which is just crazy to think about now, that we had already identified a number of different future projects and started to amass leased acreage positions in various different places. So Firvo's early strategy was gathering a lot of quality geothermal resource and leasing it for future developments. So We basically had our eye on a couple of different sites as the next project. At that point in time, actually, when we were looking at building Project Red, we thought that this repower agreement or this power uplift agreement would be something that was actually cookie cutter for us that we started doing a bunch of. We went to all the geothermal power facilities in the U.S. that all had declining brine effectiveness, and we were just going to drill our systems around the outside and provide power uplift to these facilities. And so we had a number of these repower type Projects in the pipeline very early on. What ended up happening is, as we're developing Project Red at the end of twenty-twenty and in twenty-twenty-one, a huge demand signal hit the market.

AI assessment note: “when I joined Firvo in the middle of twenty-twenty, the team already had a pipeline”

Q bit about site selection for Cape Station. You've already mentioned Utah. You mentioned this was a location where some were Wells were being drilled. I know you were also considering some sites in Nevada, which is I think the, you know, state that folks a lot of times think of as synonymous with a lot of geothermal. So what ultimately led to your decision to pursue this site in Utah?

A So we were looking at a site in Nevada and a site in Utah as the most high quality potential geothermal resources. And then the other layer that we put on top of that is they needed access into California because we anticipated that the majority of our offtakers would actually be in California for these projects. And so both of these sites had that. They had anticipated high quality geothermal resources. They had access to California. And one was in the geothermal state. In Nevada, and one was in Utah, which has a more robust oil and gas supply chain, but not a ton of existing geothermal, some existing geothermal energy, but not as much as Nevada. So the Department of Energy sponsored a test project, Utah Forge, run by University of Utah, and Forge had just started drilling wells in southwest Utah when I joined FURBO. And Basically, they were really open with their data, they were publishing their data, they were publishing all of their learnings about drilling rates and what bits they were using, etc. And honestly, their information provided a huge amount of value to us, because geothermal, unlike wind and solar, where you can measure it by observing surface conditions, you have to know about the subsurface resource in order to have high confidence that you can go build a geothermal facility in a place. And so, the work that the Forge was doing was rapidly basically de-risking…

AI assessment note: “the work that the Forge was doing was rapidly basically de-risking our acreage”

Q was a pretty robust demand signal coming from California, but a policy signal does not necessarily immediately translate into the ironclad contracts one might want. So how did you think about approaching customers to buy the electricity? Were you still looking at the tech community, or was it really about the utilities in California? And how did you ultimately convince them that this was the power they wanted to buy?

A So all of our existing binding commercial offtake agreements are with California load-serving entities, and they have mostly procured under this MTR regulatory ruling. And so I do think we've seen the offtake market evolve over time. At the start, and, you know, the people who are really willing to come to the negotiating table today are real load-serving entities who have a lot of practice signing these binding and long-term offtake agreements. When we started talking to Tech companies about these projects, and I am sort of saying beyond Google, because Google we've remained in close discussions with, and we've signed another power purchase agreement with Google in Nevada. But for Cave Station, um, we started talking to a lot of tech companies who were looking for much faster turnaround than traditional utilities expect. And so we have signed commercial agreements with utilities and community source aggregators and other led-surfing entities For a three- or four-year development timeline, or even five and six. And I think the tech companies that started to come to the table about a year or two years ago were looking for, like, eighteen-month turnaround time. These projects were simply, you know, too early stage at that point in time and had too long a development timeline. I think now we're seeing a little bit more of a robust demand from the tech community for slightly longer…

AI assessment note: “all of our existing binding commercial offtake agreements are with California load-serving entities”

Q have you experienced that? We're in a moment of kind of peak political polarization in some sense, and you're literally leveraging some really incredible people, resources, ideas from the oil and gas sector and bringing them into what is fundamentally a clean power climate forward solution. How has that felt? Has there been a lot of receptivity to that? What are, how are you all interacting with the Texas ecosystem?

A Yeah, I mean, I think at the end of the day, it is an incredibly hopeful story, and it's hopeful for people from very different angles. So I started my career in the oil and gas industry as well. You know, 12 years ago, I was running frat crews in the western United States, and I was a field hand for Schlumberger, and there are a lot of people like me On the team. So we have about 60% of our team comes from the oil and gas industry, and I think a lot of them are motivated by the idea of sort of what I call using our powers for good. It's using all of the skills and experience and knowledge we picked up in the oil and gas industry and applying it for something that can, you know, help fight climate change. I think that's a big motivator for a lot of people. I think another big motivator is just the idea that they can Use very similar technical skills, but apply this additional layer of innovation. You know, okay, we learned how to do it in shale, or we learned how to do it in offshore drilling, and we're going to learn how to do it here. And that's just really exciting to a lot of people from a technical perspective. And then it's just a hugely bipartisan solution. It's like, if you're a fan of oil and gas, in some ways we're reinvigorating and bolstering the oil and gas industry because we're using all of these service companies. All the big name service companies that service …

AI assessment note: “All the big name service companies that service the oil and gas industry are servicing us”

Q demo or from the first Commercial installation before you really lock in your design and your decisions around your next project. How did you all think about that? Like, was there a specific set of outcomes you were waiting for with Project Red before you really committed to your site or to other aspects of your next commercial project, or how did you think about that sequencing and the timing?

A While it would be more relaxing to be able to think that you can always see projects to conclusion and then Allow some time for those conclusions to sort of settle in and inform the next project. I think the next project is always being built before you see a reasonable set of definitive outcomes from the previous project if you, you know, are really on the entrepreneurial journey. So that well test where we were watching steam first come from the silencer was in early Q two of 2023. And by late Q-two of twenty-twenty-three, we were drilling at our first Greenfield site. So I think the turnaround was pretty quick, and we had to take some of that, you know, kind of like midstream feedback that we were gathering during Project Red and basically begin our Cape Station learnings based off of those things.

AI assessment note: “the next project is always being built before you see a reasonable set”

Q And you also did some pretty robust community engagement, as I understand it. Is that right? Can you talk a little bit about what you did and what sort of response you got from the local community in Utah?

A So when I rolled into town in twenty-twenty-one, Milford, Utah, was actually undergoing a meaningful shift because the largest economic driver in Beaver County was actually a large swath of hog farms owned by Smithfield. And Smithfield raised hogs in southwest Utah and then would transport them over the border into California for processing. And they had recently announced that they were starting to close some of their hog farm facilities in this region. So when I showed up in 2021, there was a little bit of doom and gloom in the air where the locals said, we're going to see these closures soon. We're going to see a lot of job loss. And so, you know, I showed up and I asked to meet with the city treasurer in Milford. And before I knew it, I had the mayor The entire city council and the treasurer there, and I was introducing a potential future project based on some sort of exploration work we had done in the state of Nevada. So I would say that was a pretty nerve-wracking moment. I explained to them who we were and what we were thinking about, and they sort of told me what was going on in the region. And it's very funny, the mayor jokes with me now that when I walked out of that room and he went back to his office, he was like shaking his head and was like, You know, I'll believe it when I see it.

AI assessment note: “I had the mayor The entire city council and the treasurer there”

Q talked with Neha about Terawatt's audacious plans for heavy-duty electric vehicles and her outlook for the industry. I started by asking her about the passenger vehicle side of the business because the LAX project was Terawatt's first full-build charging site and a major proof point for the company. So you started off near LAX. Can you talk a little bit, first of all, about why you chose that particular site?

A Yeah, so, you know, rideshare autonomous vehicles has always been a focus for us from the beginning, and a huge number of rideshare rides are initiated from airports. Um, it's also a location that's near a major stadium and a lot of other good venues that would require rideshare to be part of that ecosystem. So, uh, the location just made sense, uh, from density of demand. Uh, it also was, um, you know, a site that was You know, for sale. Oftentimes, we might be excited about a specific geography or, you know, geo-fenced area, but there may not be any flat lots or open lots or undeveloped lots to go and work with. So this was something that allowed us to engage in this area, and it was the right size for the application we were trying to put in, which was what ended up being about 30 chargers focused on passenger vehicles, um, with enough space for, uh, You know, driver's lounge, and, uh, you know, all the space for all of the electrical equipment, chargers, everything else that we needed. So, uh, the last piece that is always so important, and it, I'm making it sound like an afterthought, but it really is the most critical thing, and the thing that we almost always think about first, once we identify a location, is it had power. So, it had five megawatts of power that was available from day one. Uh, we just had to, uh, start construction on our site, and the utility had to do …

AI assessment note: “a huge number of rideshare rides are initiated from airports... it had five megawatts of power”

Q this is very cool, and it sounds like tons and tons of lessons learned from this first site that then launched you into building your second site at the Port of Long Beach. So can you talk a little bit about how that project got started, at which point you started thinking about, you know, doing this particular project, working into the heavy-duty vehicle space? How did that all begin?

A So it's interesting, you know, our vision for the company really from the very beginning was focused on being able to electrify, uh, the heavy freight industry. And so, um, the, the gleam in our eye was this segment. You know, we started engaging, uh, and look, the search for sites right when we started this business, you know, in early 21. Heavy duty fleets tend to focus on locations that are near ports, in warehouse hubs, near intermodals. And so the port of LA Long Beach was a location where There already is an intense push for electrification. There's a green lane at the port, so if you are in a zero-emission vehicle, you actually can get into the port faster with less wait time. Time is money for these guys, and so there's some significant upside for them to be able to do that. In Southern California, you also have something called the wear rules, where non-zero-emission vehicles going in and out of warehouse hubs can start to incur fines for those warehouses, and so there is a push in the area for electrification, with the port kind of being Ground Zero, the nexus of a lot of those efforts. And so finding a site near the port was kind of our first order of business when we started the, um, you know, started the company. And so it took us a while to find an ideal site. And when we did, it was pretty expensive. Um, you know, it was probably going to be the biggest single re…

AI assessment note: “our vision for the company really from the very beginning was focused on being able”

Q just with these Bob tail sort of front end of the trucks, but really a fully loaded truck that actually has a trailer behind it. So were you already sure at that point that you wanted to offer that kind of charging capability, or were you really thinking about, you know, what would the site layout look like? What were some of the trade-offs around these different options for charging?

A So again, there's very few sites that have this scale of power and size that would allow that many chargers in one location and that many trucks to charge in one location. So we're kind of, you know, I won't say, you know, making it up, but we were doing a lot of kind of product, uh, assessment and design to understand what would customers need. And if you look at a lot of the sites that are out there today, and even sites that, uh, customers have behind their fence, when they have the charging, it's usually just for a bobtail stall. Um, so this was a little bit of a tug of war between the finance team and the product team. Uh, the product team came from places that had worked with semi-trucks before. And so they really were pushing for those pull through stalls, saying, hey, if you look at the traffic flow patterns, they're going into the port or out of the port with the trailer attached to their tractor. Um, it's gonna be a really big lift for them to have to find a place to put the track, you know, the trailer, uh, detach it, come in and charge, or, you know, just be, uh, in a position where they don't have the trailer for whatever reason, they're between loads, to come back to the site, Charge and then go back and get their trailer. Just a lot of work. And so wouldn't be really a great customer experience if they had to do that. The, the tussle with the finance team was, we…

AI assessment note: “this was a little bit of a tug of war between the finance team”

Q and things like that. But I think it actually comes with a different set of challenges to be part of a bigger company that has a big focus on something that's Maybe adjacent, but not the same sort of core problem they're ultimately trying to solve. So can you talk a little bit about those dynamics and ultimately how you created a team and how you all functioned within Tesla?

A I mean, it was truly bootstrapping. We had to be extremely scrappy because in this period of time from 2014 to ultimately 2019, like Tesla was definitely not sustainably profitable on the car side. And, and, and not just was it not sustainably profitable. We went through some very challenging times like the Model Three ramp, uh, in 2017 and 2018. You know, in that period of time, we were able to build, like, a small, very, like, I would say, like, Swiss Army knife, Marine Corps, Jack of all trades group of people that could put together that early Powerwall I and Powerpack II, Powerwall II programs. You know, this was like a couple dozen group of people that made that all happen on the engineering side, and we also benefited from the fact that There was a little bit of disruption in the solar space at that time. You know, you had companies like SunPower and others, SunEdison, like a large sort of restructuring of the solar industry, the whole SolarCity acquisition. There was some talent available, and so we could really pick demonstrated, talented individuals that had done utility-scale solar projects, that had done great things in the power electronics space in the early days of solar. And then the SolarCity acquisition itself You know, there was a lot of efficiency found in that integration. Not everybody stayed, for sure, through that acquisition, but the best people did. It…

AI assessment note: “We had to be extremely scrappy because... Tesla was definitely not sustainably profitable”

Q That's very cool. And it seems like, I mean, so everybody was kind of okay with this, and they were interested in working on different things at different times, and it worked out pretty fluidly, or were there any moments where you were like, I can't get what I need to make this happen, particularly on the Powerwall?

A Yeah, it was, it was tough. Not everybody was okay with it. Some people, you know, couldn't hack it or, or left on their own accord. Specifically on the Powerwall, We did. We had this like blitz. I think we called it the, the module line blitz where, you know, we were burning down a huge list of action items to figure out how to ramp that, that energy module line. And it was everything from how do we figure out how to get the potting to cure faster to the like module palette doesn't work and needs to be completely redesigned and like, let's figure out how to get that done. And the people that made the pallet said it's going to take six months. Let's figure out how to get it done in two weeks. You know, and, and, and just really stretching people to do things that they didn't know they could do. And, and then there's always some things that have to give, right? Like, especially as we got into the 2017 and 2018, there was a cell, a cell sort of pinch. Panasonic was having a hard time ramping, and we didn't have enough cells to go around between vehicles and energy, and, and so we had to kind of, like, pare back on the, the Powerwall build plan, which was tough. And it was tough, especially in light of this, like, growing backlog we had because of all of the PSPSs. And people became frustrated that they had to wait really long for a Powerwall. And, and again, the same thing happen…

AI assessment note: “Not everybody was okay with it. Some people, you know, couldn't hack it”

Q you built that, you fought a whole lot of battles, and so you've mentioned some of these, that, like, you know, the learnings from the Powerwall One and the initial scrappiness, challenges with cell supply, needing to sort of move over to ramp the Model Three. When was the moment that you knew that the second Powerwall was a commercial success? Because that was a huge milestone for you, right?

A Yeah, that felt awesome, especially through the struggles with the cell shortages and things like that. I think it was when the VPP success, and we saw that translate into, like, The request from lots of places around the globe to, to repeat it. When we saw the Green Mountain Power model be replicated with other utilities. And when we saw the channel partners on the direct business, like basically to the end customer, you know, either directly through, through Tesla Solar or through partners like Sunrun, Sunova and others. Just keep asking for more. I think, I think Puerto Rico was a, we had that hurricane in Puerto Rico where the grid was out for so long and it really drove, A lot of demand for energy resiliency and grid support on the battery side, and Puerto Rico is still one of the largest power wall markets, which is kind of wild, because there's not a lot of people in Puerto Rico. But I think it, I think it might be the single largest power wall market still. Just the customer happiness with the final product, and things like StormWatch, and, and finally persevering through cell shortages, supply chain shortages, and hitting seven K power walls per week. You know, in, in Reno and, and, and taking all of that learning into Powerwall three and have that hit the market with such success. I mean, that's not a single, single answer I know, but, but maybe if I were to zoom out …

AI assessment note: “I knew Powerwall two was a success when Powerwall became the term for a home battery.”

Q Okay, and so what happened when you first sat down with the DLC team to figure out how you were going to put this together and operationalize it for them?

A As a new technology company, one of the things that we wanted to do was help utilities make that transition into more of a cloud-based Computing situation, right? So when you think about large enterprises over the past couple of decades, many of them have moved from more sort of traditional on-prem architectures to cloud-based architectures, even entities that highly value security. For example, the Department of Defense uses cloud-based computing now, and so we were, in hindsight, a little bit naive about the fact that we could do a cloud integration and provide this data to them, and they would Find a way to put that into their EMS and use it in, in their day-to-day grid operations. Um, I remember the meeting that we were in when we proposed that type of an approach and the wind kind of coming out of the sails in the conversation because they recognized that the cybersecurity standards that they have around their control room was really not going to jive well with a cloud-based approach. And so they are required to meet standards known as NERC-SIP, Which provide reliability standards around cybersecurity. And the control room is a highly secure environment that typically does not talk to the internet, does not like to bring in data from the outside world. You know, we had done a lot of our homework. We'd even brought in outside consultants to kind of check the robustness and …

AI assessment note: “I remember the meeting that we were in when we proposed that type of an approach”

Q first, where basically you have done so many deployments and you're so familiar to so many utilities that it becomes just a matter of course for utilities to start working with you. So can you talk a little bit about that transition? When was the first time that someone said, We want to put your system into operation, and we don't need to do a sort of initial pilot phase.

A I believe that was in 2023 when Avangrid in New York State signed a project with us, and the project from the initial get-go included operationalization, very much to the point you're making. That was a pivotal moment for us because it showed us what a buying motion for this kind of technology might look like going forward, where we don't necessarily have to To do a pilot for each individual utility and that there's enough proof points out there that the technology is trusted and we can move straight into operationalizing. Now, I don't want to overstate that. There are still very much utilities that want to prove it out for themselves, but we are starting to see that the validation is taking place within the industry at a larger scale. And one of the things that's nice about how utilities think is while they Do tend to move slowly initially. They're also not in competition with one another, which means that when they do find something that works and is repeatable, they talk to one another and they want to know about those successes. And when they see something working, they'll start to do it too. And that's when you start to really start to see kind of that hockey stick growth of utilities talking to one another and adopting a technology at a much greater scale. And I think we're starting to Uh, enter that type of a situation right now where DLR is no longer this thing that is …

AI assessment note: “I believe that was in 2023 when Avangrid in New York State signed a project”

Q so, as you're thinking about then translating these innovations to deployment, where you're really deploying at scale at a global level, can you talk a little bit about your strategy around manufacturing? How did you think in the beginning about what to manufacture or assemble on your own versus rely on kind of contracts and suppliers, and how has that changed over time, and how do you do things now?

A We have a similar approach as some other technology companies like Apple. We really focus on where we can design and product position, strategy, customers, and so forth, rather than trying to run a world-class, you know, manufacturing facility, which is its own animal and skill set. What we do is partner with companies, and then that allows tremendous opportunities to geographically position some of the supply chain activities In the more logical places. For example, uh, two years ago, we announced a major manufacturing facility with our partner, JM Steel, physically on the campus of the newest steel mill in the United States, which is in Sinton, Texas. It's actually operated by Steel Dynamics. It's a three million ton steel mill, and they do coating. And so literally on their campus, like about a mile from the actual mill, We bring, you know, master coils of steel in that are then cut down and then made into some of our components by our partner, GM Steel, which operates dozens of steel facilities around, around the world. Versus Asset and Extracker, insourcing and doing all that activity and trying to manage all that, we're better focused on the other aspects of creating value that, that I've mentioned. And so that type of model has served us extremely well. It's very capital efficient. But, you know, on some areas of developing key manufacturing technology, that's where we'v…

AI assessment note: “What we do is partner with companies... For example... with our partner, JM Steel”

Q And so the next decision you made was to build a manufacturing plant for your electrolyzers. So talk about that decision. Was that sort of like very obviously the next phase, or did you consider kind of building a hundred megawatt project before you built a manufacturing facility? How did you think about that next step?

A The cell technology is bespoke. It's, you know, invented by us. It, it can only be made by us. Um, we did not see, and we're not interested in Um, an outsourcing approach to build cells and stacks, and so, uh, even to get to the 10 megawatt facility, we needed a manufacturing operation. We made these full-scale devices in R&D labs in, uh, they happened to be in Natick, Massachusetts, for about a year, but at the same time, we, we were searching for, ultimately found, and, and built out our manufacturing facility down the road in a town called Devons, Mass. We come from a Co-founders and I come from a manufacturing background at First Solar. Building a factory is a big thing. It's a heavy undertaking, um, but it was a necessary step to proving out the technology because, look, I mean, making something work in the lab is one thing. Making it work in a manufacturing environment at a throughput that, that is realistic and at a cost structure that works for the business, that's a whole nother matter.

AI assessment note: “it was a necessary step to proving out the technology”

Q And so, how have you been thinking about lining up customers As you go into building this pilot line and ultimately this bigger manufacturing facility, like at what point did you start actually trying to line customers up for electrolyzers?

A Oh, we've been, we've been out selling for, I'd say, two years now. Laura, one thing I'll, I'll note here is that for a thing at the scale we're making at a hundred megawatt electrolyzer plant, uh, the sales cycles are very, very long, um, because they're tied to project development Life cycles and project development at this scale can take anywhere from three to five years. So our customers journey is quite long and their technology selection occurs partway through that journey, but then there's a lot more to be done before they reach what's called financial investment decision, FID, which in commercial terms means in order for us. And then we have to produce the electrolyzer, deliver it, commission it, Before it goes into operation. We didn't discuss this, but, uh, worth noting here, we at Electric Hydrogen are not a producer of hydrogen. We produce the equipment, the technology that enables other people to produce hydrogen at their projects. Those project sites can be, um, they can be in a refinery, they can be at an ammonia plant, they can be, uh, an e-methanol facility, uh, they could be an ESAF, uh, sustainable aviation fuel facility, uh, et cetera, et cetera.

AI assessment note: “we've been out selling for, I'd say, two years now.”