The Exchanges

Q is. And when you go talk to an equipment financier, you basically want to have the opposite argument, right? Because they want to know that they can resell this and it's going to be easy for someone else to use and it's low risk and all these other things. So how did you think about that dichotomy and where do you think you fall on that actual technology risk spectrum?

A Yeah, you're right. Venture capital wants a moat, right? A technology moat in our case. You know, what's special about you? What can you defend? Um, and that, that does on the face of it seem to be a conflict. We always have taken the position, and again, this is learning from our experience in manufacturing and solar. We've always taken the position that it's in our interest to leverage as much as possible existing solutions, particularly manufacturing solutions from nearby industries. Lots of people in the world use membranes for different things, like water purification, for example. Can we borrow, adapt manufacturing technology, process technology from those industries to our needs? So the approach we've always taken is avoid customization of equipment wherever possible. Use standard off-the-shelf equipment. You know, it can always be configured, so you'd consider that more tooling, but use available equipment that's well-proven, well-demonstrated, With all the bugs and kinks worked out of it, adapted to our needs. Uh, and that fits very well with the capital financing, the equipment financing approach.

AI assessment note: “avoid customization of equipment wherever possible. Use standard off-the-shelf equipment.”

Q Well, so let's get into the details of this. So you mentioned that you, you essentially needed to build a sort of small amount of manufacturing capacity just to be able to get to your 10 megawatt demo. Is that right?

A Yeah. So in our manufacturing facility, we built a pilot line. And so think, you can sometimes think of a manufacturing facility as multiple parallel lines, um, feeding into, you know, into larger unit operations. Um, we built a pilot line for the Critical piece of the technology, which is really the membrane electrode assembly and some of the other components, um, and started to exercise it. It took maybe six months, I'd say, to root out all the issues, to debug that process, which, you know, you find all sorts of things when you do this, uh, because you no longer have PhDs building something, you have technicians building them and it's a whole nother animal. So yeah. That's, that's what we had to go through to, um, to start to produce at a scale sufficient to, uh, feed both our, our 10 megawatt pilot plant in San Jose, but also, uh, to continue to iterate on the technology and improve its performance and reliability. Um, we're now in the phase of ramping up the capacity on that line to produce commercial volumes.

AI assessment note: “Yeah. So in our manufacturing facility, we built a pilot line.”

Q of the craziness and changes in input prices, etc. Um, you're continuing, presumably, now to acquire customers and kind of move things forward. So let's talk about what was happening to the company kind of as we start emerging from COVID. What was your idea on kind of the next set of things to go do now that you're able to at least theoretically operate at this hundred megawatt scale?

A Yeah, so, uh, the market in that kind of ensuing period from when we first were building our projects to the early, you know, twenty-twenty-one, twenty-twenty-two time frame. Solar had used up a lot of the flatland that we talked about earlier, and so there started to become a lot of projects that were on undulating terrain, and we looked at that, and we said, oh wait, that is one of the things we always knew we could do well, and when we started doing testing on it, we realized we could do it phenomenally well, because each of our actuators is driven by air. Most trackers are connected with a long torque tubes, It's long steel tube, and so all of them are connected by the super long steel tube, which means that the ground beneath it has to be flat. Um, and so that usually means you're either on flat land or you need to make the land flat. And generally in solar at the time, people were just, uh, doing the grading. And on some sites, that was not a big deal, and on some sites, it both was, I would say, ecologically devastating as well as very, very expensive. Um, but it was happening a lot. And we saw that and realized that this value proposition we had discounted early on when solar sites were flat was suddenly something that made our technology unique and exceptional in terms of the value it could bring. Not just value in terms of cost, but value in terms of preserving the la…

AI assessment note: “there started to become a lot of projects that were on undulating terrain”

Q past dozen years or so, and it's become a really strong pillar in geopolitics, global trade, and domestic industrial policy. Driven those cycles in your own ways here in the U.S. So before we delve into the upheaval caused by the Trump administration and take stock of the moment, I want to get your take on the state of the energy economy on January. What did President Trump inherit? Jigar?

A I think it was pretty clear that we were entering a period of load growth. And that we needed a lot of tools by which to do that. And I think that the ramping was occurring, whether it was an enhanced geothermal or nuclear or solar, wind, and battery storage. Um, and so I think there was a lot of work that was done, competencies that were put into place, right? Um, new rules that were put into place. But also, I'd say for the first time ever, the electric utilities were being quite Open-minded around advanced conductors, grid-enhancing technologies, other technologies that could really get more out of the grid we've already paid for. And, uh, I think people couldn't get enough of virtual power plants. And so, like, for the first time ever, demand flexibility was actually a thing, right? And that FERC order, 22, 22, had been passed in twenty-twenty. But I think people actually felt now That money was moving, and that folks really, um, wanted to do this. So I think, well, what happened on January 19th and the, the status of the industry was really one where people thought that we could do big things. They thought that these big challenges were things that we could actually tackle with the tools that we had.

AI assessment note: “I think it was pretty clear that we were entering a period of load growth.”

Q As you're having these initial conversations to figure out, basically, can you work together? What is Happening inside WS development. Like, how are you convincing your team to do this? Because obviously you've got this ethos of experimentation. So does that mean you sort of mentioned this in a meeting and everyone's like, yes, let's go do this? Or was it more complicated than that to get everyone bought in?

A Nobody really knew what to expect at first. This was something completely new. And although we like to think of ourselves as a company and our Seaport team as at the forefront of innovation in the built environment, The reality is the design and construction industry generally, especially in the United States, tends to be pretty reluctant to try new things and to try new materials and products. So there was a, I would say there was a healthy skepticism among the team when this idea was first raised. Uh, it was not something that had ever been used in commercial construction before. Now re-enter at that point Sublime. They recognized that Reluctance. They recognized kind of the ethos and culture of the design and construction industry, and they recognized early on that in order to gain traction and ultimately be adopted by that industry, they had to do a tremendous amount of legwork in terms of testing and demonstrating that the product could meet the appropriate standards to satisfy both the designers who were going to have to specify the product and be comfortable that the product will perform, And construction partners who are going to have to actually work with the product and put it in place in the field. And so what we found is that the Sublime team had already done a really, really robust array of tests, both in the laboratory and in the field, that they had already been …

AI assessment note: “I would say there was a healthy skepticism among the team when this idea was first raised”

Q Okay, so tell us about the moment that you decided to press go as a company. How excited did that feel? What was it like? Or was there even a single moment?

A No, there was definitely a moment when, when all the stars aligned, uh, the data was, was good. The design and construction team had signed off. We identified the location. Uh, Sublime had confirmed that they'd be able to deliver the product, and this was a relatively short time before we actually were making the installation, just because they were the ones who, who were, uh, On the hot seat to, to produce enough product in a timely manner for us. And so it came together a couple of weeks before the placement. And I think we were all sort of just looked around, uh, around the room at one of our weekly job meetings and said, okay, we're going to give this a shot. We're going to try it out. It's going to be really neat. And we had our first placement at the beginning of May, uh, 2024. By that point, everybody was lined up. We had the plan in place. We knew where it was going to be. We had the logistics plan done in terms of where the trucks were going to come in, how the concrete product was going to get to the place where it would ultimately lie. You know, all the legwork had been done, and we were all just sort of holding our breath, waiting to see how this was all going to go.

AI assessment note: “there was definitely a moment when, when all the stars aligned”

Q Okay, so your confidence is going up and up, and now you're approaching a second concrete pour date, and you hit a bit of a snag in the form of one of this podcast's favorite bugaboos, which is the weather. So can you tell us a bit about what happened in July?

A Sure. So the sidewalk pour was an outdoor pour, and it was a very, very hot day. And just by way of background, when concrete cures, it's an exothermic reaction that generates a lot of heat, And you really don't want to have concrete get too hot as it cures because it'll crack, it'll fail, it'll spall, uh, and you have to chip it out and start over. So we're, you know, we're pretty good in the industry at, at figuring out how to deal with, um, hot weather placements of normal ready mix concrete. We add ice to the mix. There are other admixtures that we can add to the mix, uh, to keep the concrete temperature down and the, uh, uh, the exothermic reaction under control. We really didn't know what to expect with the Sublime product. We didn't know whether it was going to respond the same way. And so we sort of stood around that morning and said, okay, it's going to be really hot. What should we do? Is there anything different we should try? And the team, the Sublime team suggested that we just treat it like any other ready mix concrete, you know, in a hot weather pour, which is exactly what we did. Nobody knew how it was going to work. Nobody knew how the, how workable the concrete was going to be, whether it would set up too fast, too slow, whether it would crack very quickly, but we treated it just like normal ready-mix concrete on a hot day, um, and everything worked out great.

AI assessment note: “the sidewalk pour was an outdoor pour, and it was a very, very hot day.”

Q They also had a unique partnership with Boston Sand and Gravel, right? So can you say a bit about how important that partnership was? Had you worked with Boston Sand and Gravel before? What did Sublime and Boston Sand and Gravel do together that kind of helped give you confidence?

A Yeah, great, great question. Boston Sand and Gravel is a, is probably the largest ready-mix concrete, um, provider in Boston. Uh, they've provided most of the concrete for our Boston Seaport project over the years. They're a great Partner. But we as WS almost never intersected with Boston Sand and Gravel as an organization because they were a supplier to a subcontractor to our general contractor. And so we were, you know, we're several rungs of the, of the supply chain removed. And frankly, the first time any of us had ever actually met the whole team for Boston Sand and Gravel was in the context of the Sublime adventure. Which I think was, is kind of interesting and illustrative in and of itself. But Boston Sand and Gravel is, um, simply put, is Sublime's customer. Sublime sells their product to Boston Sand and Gravel, uh, which at a batch plant near North Station, uh, Boston mixes the cement product, which is the, the catalytic component of ready-mix concrete, with the aggregate, with the admixtures, with the water, In order to create the kind of ready mix concrete that comes off the cement, the concrete truck in the field. Um, and Sublime, again, very presciently had been working for several years with Boston Sand and Gravel to better understand the ready mix concrete business, the, the risks that Boston Sand and Gravel as their primary customer would be concerned with, some…

AI assessment note: “that foundation had already been laid, so we weren't starting from scratch.”

Q how this was sort of approaching first of a kind for them, that they saw that you had initialized construction and that that was going well. So is that right? And were there kind of specific milestones What were the things that were decisive that, that when you showed them to the debt investors, they said, that's the thing that makes me believe in you and I'm ready to go.

A I think it was, I think it was more than one thing. I think it's a combination of a credit-worthy brand name customer with a long-term contract, so there's some guaranteed revenue from our contract with Southern California Edison, and they've been around a long time, they have a strong credit rating. That's a huge plus. Second, I think, is the fact that even though Gridstore was an unknown entity, Goldman Sachs most certainly is not, and that certainly gave the banks and lenders some sense that, okay, this isn't two guys in a truck, this is a real Uh, entity with real backing and, and Goldman Sachs has a track record of being, um, successful at these kind of things. I think that certainly helped and, and benefited us. And then the third was using, uh, technology that nobody had any real questions about. Like, who is that? Why are you using them? Do they have a credit rating? Again, people have all heard of Tesla. Probably a lot of the bankers drive one themselves. So I think that certainly helped. Um, I think long-term revenue from a credit-worthy off-taker, uh, A bank, you know, a bankable sponsor with a track record. And it's not just the name Goldman Sachs, but the people on our team had real track record building and operating projects and could answer questions. Those are probably the key, the key factors that made this attractive to banks. And also banks, you know, while …

AI assessment note: “Those are probably the key, the key factors that made this attractive to banks.”

Q Interesting. All right, let's get into the actual construction of the project. I love this part because we get to talk about real steel in the ground. So when did you break ground, and what was your construction timeline?

A Yeah, we broke ground in Q-one of twenty-twenty-three. I can't remember what month it was. I think it was probably in March, if I remember correctly. It was not the beginning, uh, of the quarter. That, that was when we had full mobilization to start. We started moving dirt and clearing and grubbing in the fall of twenty-twenty-two. Um, but we didn't actually have full construction crews on site and, and do full mobilization until Q one of 23. And we energized and started operating in, in December of 23. So effectively the project was built in under a year. Um, and like I said, most of the action happens very quickly. Once the site's been cleared and it's ready to go, unfortunately for us, then we had the biblical deluge of 2023, um, on the California coast. If you remember, it rained more than like in any year in recent memory. Um, And the places where our batteries were supposed to go looked like swimming pools. Um, so we had to dewater the site, which means come in and suck the water out so that it can dry faster. But luckily we were able to, to, to make up on schedule. We had to work some nights and weekends to get that done. Um, but we were able to do that. I think we were installing a mega pack every two and a half minutes at the peak of construction. It's pretty incredible. That's how fast they were able to load them on. Maybe it was every five minutes, but they were able…

AI assessment note: “we broke ground in Q-one of twenty-twenty-three”

Q Okay, so walk me through the process. So you've got a project that's up and running. You've got a contract signed with SoCal Edison for resource adequacy. The IRA has passed, and you're now thinking about how to apply tax credit sale to this particular project. So what's the first step?

A Yeah, the first step is, I guess, determining what you think the likely, the most likely candidates are for counterparties on the other side to monetize the credit for you. So there's a pretty well understood league table of who are the biggest investors in, in, Historically, it's been wind and solar, um, and they have different appetites of both how much they want to do and what type of deals they do. So me and my team, mostly we came from the renewable energy space, so it's all the same people we've been dealing with for the last 20 some odd years. So you kind of know, you know, the biggest investors in the US have historically been JP Morgan, B of A, US Bank, Wells Fargo, people like that. Um, so you start with those people. If they're not A fit for some reason because they have a sort of specific box of what they will do. Then you have to start thinking about smaller players who maybe have a specific niche that aligns with what you're trying to do. In this case, like I said, we wanted to go to like the big mainstream players and, and, and demonstrate that this was a mainstream product that even the biggest banks can get behind. And so that's why we did it this way, which is kind of unusual for a first of a kind thing. You typically think you'd go to some smaller niche player that's interested in doing something new and unusual. But that's not how we, we approach this one.

AI assessment note: “the first step is, I guess, determining what you think the likely, the most likely candidates are”

Q should, or is it may, and all the things that flow from that. The legal profession is awesome. Um, I mean, with all the seriousness in my heart, that's very cool. Ok, so, what happens next? So now you've completed this tax credit sale. Presumably you have a whole lot of other projects in the pipeline. Where are you building? What are you doing? Where does Goodstore go from here?

A So this was, like I said, really, you know, for us, a proof of concept, a chance to demonstrate and to both learn and demonstrate that we can do all of the things associated with, you know, financing a project, building a project. Um, now we're operating the project every day. Um, you know, that, that's a whole other expertise. Figuring out how to maximize the revenue available from a project is, is complicated. Predicting what's going to happen with power prices, You know, within the hour, within the day, a day ahead, or the day of, is, is tricky, and, you know, it's a whole industry, and, and we're having to become adept at that. Um, so we spent a lot of the last year really honing our trading skills and our predictive powers, and, and we're pretty happy with the outcome there. Now we're in the middle of building a project in, uh, near League City, Texas, which is just south and east of Houston in Galveston County, Texas. Um, and that project, equipment's being delivered, installed on site as we speak, um, Um, it's a much bigger project, 220 megawatts, and on a much bigger site, it's Texas, everything's bigger in Texas, um, but we're in the middle of, and, and that's been an interesting one. We've had, you know, weather challenges down there, we had a port strike, you know, and now we've got possible tariff things to deal with. Those, those batteries will all be in the countr…

AI assessment note: “Now we're in the middle of building a project in, uh, near League City, Texas”

Q to put together one of the first ever tax credit transfers using IRA tax credits. We'll get to that after the break. So now you have a project that's up and running, it's working, you're serving SoCal Edison's needs, and at this point you went further into exploring a tax credit sale. So can you start by just explaining, like, what that was and when you started considering doing this?

A Well, we knew we were gonna, you know, as soon as the Inflation Reduction Act passed, we knew that this project would be qualified to, to, to receive those tax credits. And actually because the, that law hadn't passed when it was, when the project was first acquired, That was really on me and my team to figure out how to, how to monetize that, that credit. Um, you know, so we have people on my team that have done tax credits. I did a lot of tax credit investing at Google and before, and obviously the Goldman Sachs team knows a thing or two about this, but it was new, and none of us had ever done it before with batteries. Um, we deliberately went to one of the biggest financial institutions in the world that, that does these kind of things. That would be more difficult to, to close a deal with them, but that if we did That would be a real proof point for us, and also they could be a potential partner for future projects because they have a lot of scale. So we kind of went straight to the biggest of the big boys, and, um, I think again the Goldman Sachs backing, the SoCal Ed contract, and the Tesla equipment probably helped get them interested in doing that deal, but we were able to structure that, which is a transfer, like I mentioned, where there is no actual partnership. You're just selling them the tax credits at some discount to You know, if it's worth a dollar, they buy it …

AI assessment note: “as soon as the Inflation Reduction Act passed, we knew that this project would be qualified”

Q in construction, you are fixing a challenge that you're having with your Container modules. You're moving forward, but that's not your only challenge. You've mentioned before that you're in Iceland and that it's lovely part of the year. Little bit cold another part of the year. So can you say a bit about what happened, ah, in the middle of construction related to the fact that winter came for you?

A Yeah, Iceland in, in winter is not necessarily the most pleasant place to be. Um, so heaps of kudos to my, my team and especially my maintenance team that works outside in winter, um, to make this happen. Happened during operations, and then also during construction, but there are ways that you can shield the team, especially construction teams, from these really harsh winter construct, ah, conditions, and that's by having the various buildings, both the auxiliary buildings, so some of the construction buildings, which were kind of like pop-up tents to allow fabrication to continue, um, as well as the main process hall and maintenance hall built as well. Um, we knew we needed to do this, and we see it Um, still as well, and during operations, we have kind of like wind limits and wind thresholds, after which we don't go up in cherry pickers, um, because it's just too dangerous and unsafe for the people to be working. And it's not just about wind, but also when it's cold, it's just really hard for the guys to work for long durations outside and service equipment as well. So once we had the buildings, both the permanent and auxiliary buildings built, We could provide temporary heat and then allow, um, efficient construction to continue. Still didn't mean that we didn't have to come in some days and dig for our, dig for our, uh, pipe or our valves that were covered in snow overnigh…

AI assessment note: “there are ways that you can shield the team, especially construction teams, from these really harsh winter”

Q a really knowledgeable engineering procurement and construction firm, it brings a lot of comfort to investors. Um, it sounds like there were some reasons to do that from a scalability perspective in your case. So let's talk about how you made that decision for the Mammoth plant. What were the pieces that you kept in house and what were the pieces that you sent out to an EPC and why?

A So what we did keep in-house was the design of the core hardware, so those collector units that you see, and then also, um, for the, the process engineering nerds out there, so the core heat and material balance, the process flow diagram, and the process instrumentation diagram, so the process engineering that supports the hardware as well, or you could even say the hardware supports the process engineering, because ultimately what we are as a, Our company's core technology is we're a process technology company that also has this special hardware. So, the hardware design we kept in-house, we worked with a, a few manufacturers to manufacture the collector containers, and then we worked with an EPC to then take our process design and turn that into a real, a real facility.

AI assessment note: “So what we did keep in-house was the design of the core hardware”

Q Didn't you have an issue with a water tower as well?

A Yeah, so actually after we started running the, the plant and we're commissioning it, um, during the second winter, the cooling towers, um, Which provide cooling for, um, our process. We had isolated and drained it, um, knowing that there was a, um, a time offsite for, or there wouldn't be many people on site during that period. Unfortunately, some rains came and filled up one of the valves that had been closed, and the cooling tower filled up, and finally it got so cold that we ended up with a bit of an ice block. Uh, it didn't, nothing exploded or expanded because it was an open water bath, but, uh, it did take, A couple of guys a whole day sitting there with a hose just trying to get that ice block to melt.

AI assessment note: “it got so cold that we ended up with a bit of an ice block.”

Q a proof point to get to something bigger, and I'm going to be trying some new things here. So how did that relationship work? It sounds like you'd known them for a while. How did you talk to them about the degree to which this was already something that, like, you knew how to do versus this is something where you're really proving out some new pieces of the technology?

A Step one, this was a pilot for the, the full-size installation will be about 600 megawatt hours, and again, they recognize that that's too big a step. But the, the short answer, and the thing that's true with every customer, I think, once they understand what a Rondo heat battery is, all the engineers, like, okay, this thing makes steam exactly the way we make steam today. We make steam in exactly the same heat recovery steam generators that we build in. By circulating air, we blend it down to 650 C. So when an engineer looks at, okay, what is this thing versus what do we do today? Oh, it's fundamentally the same. And, oh, and there's nothing in the box except brick and iron. There's nothing that is capable of causing any Fire or gas release or whatever, because we're being installed in the middle of their refinery. Safety is the number one matter. Okay, and now let's do a, a walk down of all the design things, how we're going to connect. So there was technical diligence on their side, and then we chose with them a particular way of interconnecting to their process so that They put in the interconnecting flanges and the circuit breaker for us during a ordinary facility maintenance. Rondo has not caused five minutes of outage for Calgary since we started working there. And then the last matter was, let's create a commercial structure where we're putting our money where our mouth…

AI assessment note: “We're not asking you to take any technology risk. We're going to sell heat.”

Q So it's early, 20, 23. You're nearing completion of construction. You turn the unit on and you get First heat. Can you explain what that means and what that felt like?

A The way things roll, it was a little bit anticlimactic because of all the subsystem testing that led up to that moment. Um, it's not like launching a rocket. You know, this is a really very simple thing. Yeah, well, I suppose that's right, yes. And within, I will say that within about three days, there was a real moment of triumph because One of the things that we did not mention earlier that was critical about this system was validating the computational models of what goes on inside and, and seeing the observed set of temperatures within the system as we charged and discharged it. One of the members of our design team in his last job was working on Mach six hypersonic missiles, computational fluid dynamics. Now he's working on computational fluid dynamics at six miles an hour, and it's just as hard. You know, these things are really simple, but they could not be designed without modern multi-physics simulations of exactly how does all the gas and heat transfer work, because we'll either not charge properly, we could have brick that was deteriorating because it wasn't being heated evenly, or especially We wouldn't have the same storage capacity. We would not achieve this thermocline that I mentioned earlier, and that's about the gas dynamics. Three or four days after we turned Calgrin on, CTO was distributing this picture that, again, it doesn't look like much, but it's a pict…

AI assessment note: “it was a little bit anticlimactic because of all the subsystem testing”

Q field. So you've built, you know, this two megawatt hour project. You're now building hundred plus megawatt hour projects. Are you maintaining pretty much all the same technical specifications around the bricks and some of the basic elements of the plant? Is there anything new that you're putting into place with respect to Materials or construction processes or anything? How are you thinking about this, this next scale up step?

A There are no changes in the materials. The materials that we used in making these first things are the materials that we're using in all the current things. And our, one of our independent engineers said, look, you're using stuff that's 10 times stronger than it needs to be. That's on purpose. There will be a period where we're doing value engineering and bringing things down. But being conservative so that anything that we had not anticipated, there's a big, very large safety factor is part of the current design philosophy. There are things we learned, as I mentioned earlier, about tolerances and how to design around and create greater flexibility for tolerances, that there were some improvements. Those were particularly not the brick, but the, um, there's a system by which the electrical Heaters are suspended in space with ceramic. They call it furnace, kiln furniture. There's ceramic supports, and there were several iterations and to make it easier to install and make it easy, make them more reliable and make them more manufacturable. So there have been things, lots of small component things, and then the hundred megawatt hour units are a different system design. They're made of More of the same brick, but you know, all the, everything about airflow ducts and boilers and all those things are different. So there are system design things that, you know, the, the system around …

AI assessment note: “There are no changes in the materials.”

Q a plan to finance this on balance sheet through money that you're going to raise yourselves. And now you're starting to get into construction. One of the first decisions that you are facing, you mentioned this earlier, is about the size of the bricks that you're going to use. So can you say a little bit about what the challenge was there and the decision that you had to make?

A We had a structure, but we were implementing that structure with individual cast bricks that each weighed like 50 kilograms. But then we realized we store a little bit more energy per kilogram than a typical lithium-ion battery pack in brick, but We're going to build a hundred megawatt hours. It's a lot of kilograms. And a 50 kilogram brick is almost perfectly the wrong size. It takes two people to handle it, and there are a lot of them. So to the extent that we could make larger single bricks, we could reduce crane operations or people hours building these things. And we have a trade-off of manufacturability and yield and construction labor building the thing. And we know that eventually, We want to be using much larger things. We eventually want to pick up multiple tons with a single crane lift or lift as we're putting these things together. We also have tooling to choose. Are we going to use forklifts or telehandlers or hydraulic cranes, or how are we actually going to be constructing these? And we made a decision that said, instead of building Calgary with 50 kilogram bricks and then deciding that we're going to build the next one with one ton bricks or half ton bricks, Let's take that hit now. Let's make sure that we build cow grown of exactly the same brick and everything else as we build the large one, because otherwise we've got more kind of scale-up risk that we had no…

AI assessment note: “a 50 kilogram brick is almost perfectly the wrong size... Let's take that hit now.”

Q you apply that to any potential changes under the Inflation Reduction Act? A lot of speculation about what programs could be impacted and what Would be left alone. If that is the case, and there's bipartisan support for strong market signals to support a wide variety of energy sources, including many categories of clean energy, what would that mean for the IRA, where there's so much funding in Republican states?

A We know there's definitely going to be a tax discussion in Congress next year. The reason being because this bill called the Tax Cuts and Jobs Act, TCJA, that was passed, um, under reconciliation, which means only with votes from one party, basically, in 2017, that bill is going to expire. Several provisions are going to expire next year. So tax is going to be on the table. Tax is going to be a conversation. Some have said that they think IRA is going to be a pay for, for that bill. In terms of sheer number of dollars, the cost of the TCJA to extend everything, if, if that's what Congress decided to do, IRA would just be, would be a very small percentage of the cost of that bill. So from a pure numbers perspective, I'm, I'm skeptical. But, you know, going back to what we were talking about earlier, I, I I think Republicans are hearing a lot from businesses who are investing in their districts about how they are seeing the benefits of IRA and how those tax credits are really a lot of the reason why they are making investments in their districts. And so because of the direct connections between the clean energy investments that are happening and the locations in the country and where, where that's happening, I think we're, we're going to see Some continuation of IRA. And we've, we've heard this phrase thrown around, scalpel, not sledgehammer. Scalpel being, let's make tweaks, let…

AI assessment note: “I think we're, we're going to see Some continuation of IRA”

Q also talk a little bit about the financial side of the equation, which as you know is near and dear to my heart. So you're here, you're ready to build a hundred X scale up factory. You've got a partner who's excited and willing to work with you. What were some of the alternatives that you considered around how to finance this commercial facility and where did you wind up?

A Yep. So, um, how to pay for it was obviously very front of mind. We were, uh, at this position, so this would have been summer of twenty-twenty-two. We had raised our Series B the prior fall, so we had a bunch of cash in the bank, a lot of which was earmarked towards the first commercial project, but we did not want to use it all for the first-of-a-kind plant, and so I was kind of pounding the pavement talking to Early of a kind funds, and what I learned was that the project finance that I had hypothesized was out there for, for first of a kind systems was not. Um, that those were truly, and, and probably should be, uh, early of a kind. So maybe you're not meeting your full, um, full IRR expectations, but you're, you're most of the way there. There's enough money to spread, uh, across Across the, across the multiple parties. Uh, this project, uh, was not a good fit for that because we didn't have a full picture of the designs until we were, we were very close to delivering. Uh, we didn't have the contract signed until two months before we broke ground. We did not have the finance cap capacity on our team to Deliver project finance at the time. So there were, there were, there were a number of factors here. And instead, we, uh, started to look at things that were a little bit more corporate focused. So things like equipment loans, things like venture debt, uh, things like additi…

AI assessment note: “we started to look at things that were a little bit more corporate focused”

Q Okay, so now you're getting into the moment where you're building this project. Uh, who is your engineering procurement and construction firm? How are you thinking about the decision around what you own and what you are contracting with others to provide when it comes to actually building and delivering the project?

A Well, we decided to be our own general contractor so that we could stay very close to the engineering, the EPC, the engineering procurement and construction phases of the project. We did that for a couple of reasons. The first is because we wanted to be able to, uh, take those learnings for the future and be able to translate those into cost down, into optimization, into the, the data gathering that, that we were doing. And the second was because we, um, did not have, uh, a partner who could do everything. Uh, there was no kind of one entity that both knew the facility and the customer and, uh, The ways that customer worked, as well as could deliver the things that our team needed them to do, as well as procure, for example, on the lead times that we required. So we did not follow the traditional FEL process for this first-of-a-kind system. We did much more of what's called a design build, and we did that intentionally for speed. We did that because as a venture-backed company, uh, We have a burn, and delaying the construction of our project means that we're, we, we are burning regardless. And this a little bit goes back to the 10 X or the hundred X conversation. In order to deliver a project like this, you need a certain number of skill sets. Uh, you can't necessarily contract all of those skill sets. And whether it's a 10 X system that doesn't generate revenue, or a hundred X…

AI assessment note: “we decided to be our own general contractor so that we could stay very close”

Q permitting process? Was there something that they saw from the pilot that helped them understand this was really going to be a good economic deal? I'm curious to understand, like, what did you prove to them to get them to say this? And then secondly, what's in it for Morgan Stanley? Like, at the end of the day, there are other tax equity deals they could do. Why this one?

A Well, that's a good question. So they wanted to get into a new market with solar. There was tax equity for wind. PV was expensive and small. And so, you know, this was really viewed as the next interesting market for tax equity. But what, importantly, what they looked at, when the pilot started to generate steam to spec, I believe that was a condition precedent to Morgan Stanley putting their capital into the company. But remember where we are in time. So this was 2009, and the financial crisis hit. So we bridged, we, I believe we took the capital for Morgan Stanley in 2008, and then the financial crisis hit, and guess what disappeared? All the taxable income of all of the Wall Street banks. So they, their tax equity appetite went from very large to zero, overnight. Everybody was fired from Morgan Stanley, we lost our board member, we lost our tax equity sponsor, and that was the pivotal part of a very complicated financing that disappeared in 2009.

AI assessment note: “they wanted to get into a new market with solar... pilot started to generate steam”

Q think, you know, in some fairy tales we'd love to say, and then they all owe Tapley ever after, but let's get into what it was like doing construction, because that's not quite how it was, right? Maybe we can start by talking about some of the, some of the heart-stopping moments you had related to some of the environmental challenges that started coming in as you're constructing this site.

A Yeah, so some of the environmental challenges were happening before construction. It was around desert tortoise. So we had to make some concessions through the permitting process. One was to reduce the size of the site from over 4000 acres to 3500 acres. Uh, we also then started and agreed to do what's called a head start program for tortoise, where basically of the, of the eggs that are actually laid, uh, only two percent survive. So we took pregnant tortoise, we found them, and we moved them, we took Eggs, we, and we created this nursery, and we actually inverted those numbers to where over 90% survived when we had them in a nursery, and then we moved them to other lands and other areas that were better habitat. Um, and then we had construction starting. Um, there we had some really interesting, I mean, some things you couldn't even believe. We had a on-site, large tent facility that was a temporary manufacturing We had a facility complete with a robotized automated assembly line where we were going to assemble a 173,000 heliostats because it made more sense to assemble and do the manufacturing on site rather than do it remote and take a fragile facility manufactured piece and run the risk of damaging it. So we've just had mirrors, steel posts, and motors shipped to the site and then assembled in this automated process. We happened to have a brown cover to that temporary, 18 …

AI assessment note: “CEC, California Energy Commission, uh, tried to stop all construction”

Q the permitting front, but as you're doing this, there's really a gathering storm on the horizon when it comes to some shifts in the solar market, and specifically the cost of silicon PV. So talk a little bit about When and kind of how you were observing the cost reductions that were coming through solar PV, and when you started to realize that you might have a cost competition problem?

A So, go back to, when we first started, and I mentioned it was, we were about half the price on an LCOE basis. PV started to make some improvements. The raw silicon was starting to be produced in China, lower input cost, and PV was dropping. By the time you got to 2009, it was down to maybe three dollars a watt. And three dollars a watt became an interesting number. So, That's when the U.S. team started to pay attention and say, you know, this is something that is now, it's been cut in half. It's gone from six dollars a watt to three dollars a watt. Two years later, 2011, it was lower than you could do the next gen of CSP at in just two years. So we started, we had, um, we had a lot of land, we had PPAs, we had development assets, and so the, um, development team basically said we Should consider moving and using all of our development assets for PV, which is a hard thing for a engineering-led technology company to do because you'd like to believe that your design is better, and it takes a lot to say it's not. It's now no longer cost-competitive. And the truth is it wasn't, and so we basically said, let's present data, let's talk about information, let's talk about the price, and let's look at different possibilities. In the end, a lot of the engineering team that was based in Israel and had formed there had a strong belief, as did some of the venture capital money that had inve…

AI assessment note: “By the time you got to 2009, it was down to maybe three dollars”

Q So I want to start by maybe poking a little bit, and, and, and we're going to get into design and implementation, but if we step back and get, like, maybe your most provocative take, I'd like to hear from each of you if you have something particularly provocative that you, uh, think about rates, you know, what, what, what is your most provocative take, Scott?

A Well, I wish I was described as provocative more often, uh, but I will do my best here. I think, and, you know, I was thinking, you know, rates have been talked about for hundreds of years, so can I come up with a new and interesting take on, on rates that haven't been? But I, I do think, hopefully this is provocative, I think that rates are both, both going to get much more complex and much more simple. Uh, I think what's going to happen ultimately is you will have Some disintermediaries or what they're called aggregation service providers, ASPs, that will be sophisticated enough to work with business models that are much more complex today. We'll, at some point today, we'll, we'll talk about these dynamic prices and things like that that are very complicated for typical humans who don't pay attention to their bills. They'll get that, but they'll figure out a way to manage the risk around those complexities of the rates, maybe through a trade-off with customers to allow them to Control when they charge their EV or, or charge or move their thermostat around. And those customers may want a very simple rate. Just give me a subscription to a Netflix type rate and the disintermediator will be able to work with that complexity, manage the risk and offer us very simple product to customers. So I think, uh, I don't, I think there'll be a wide variety of rates out there, but one of the…

AI assessment note: “rates are both, both going to get much more complex and much more simple.”

Q Did the utility benefit from these successful programs? Like, how does the utility and the customer benefit in some of these cases?

A Certainly, um, PSEG on Long Island Is in the process of moving from an opt-in, um, uh, pilot to a default time of day program, but that one of the reasons they're doing that, they found in the opt-in program, they sort of got the, what I call the holy grail, which is they realize system benefits, um, they had the peak shifting we've been talking about, and at the same time, they had bill reductions, so customers benefited and the system, and so that's really, if you can achieve both of those, Um, you really hit the holy grail for, for what you want a TOU program to do, and so really excited as they move to, uh, roll that out to their whole population. You have to have a, be a little tempered and an opt-in, uh, pilot because customers may be self-selecting. They may be the ones who are most flexible, so we'll see how that goes, but early indications are that they found a rate design that works for customers and for the system. That's really exciting. Uh, Southern California Edison, we worked with, uh, they measured on one peak day, The price signal to, uh, time of use customers, this is one of the heat storms in California in August, September, I think, of twenty-twenty-two, but they measured 75 megawatts of load reduction. Just, you know, millions of customers at one and two kilowatt hours, you know, adds up. I guess I hope that math works. Maybe it's more than that, but, um, a…

AI assessment note: “they realize system benefits, um, they had the peak shifting... at the same time, they had bill reductions”

Q Catherine, what do you think? Geothermal, underrated or overrated?

A Oh, so underrated. I totally agree with Jigger, and that liftoff report that DOE did was great. It was really, really top-notch, um, and I agree we have a lot of work to do, but there are so many solutions. You mentioned a few companies, um, Ever is a company that I work with. They're a closed-loop technology, so the cool thing about these kind of next-generation technologies is you don't have to find a reservoir. You don't have to find a hydrothermal resource. All you need is heat, so you dig down, you find heat, and guess what? If you dig far enough anywhere, In the entire world, there is heat. So Evers' first commercial project is in Gerritz Reed, Germany. They're going to produce thermal and electrical energy. They have a lot of district heating in Europe, so this is a really good solution for them, and that is not what you would consider a super, you know, thermodynamic resource in Germany, as opposed to the American West, where it's really, really good. Um, and yet that's where they're starting, and I think that's going to happen throughout the U.S. as well, in addition to the American West, where the resources are really, really good, but you need some things. You need, like, a categorical exclusion on public lands the same way that oil and gas and other renewables have. You have to have people really processing those permits, so, you know, if somebody from BLM has a sta…

AI assessment note: “Oh, so underrated.”

Q could cut the cost of a 90% clean grid by Eighty-five billion dollars by twenty-thirty-five. And, uh, Brian Deese calls it a triple win for doubling the size of the grid. So, there is a lot of excitement about these technologies, certainly a lot of barriers to how they're getting deployed within specific utilities. So, is this set of technologies underrated or overrated? Catherine, you go first on this one.

A Yeah, I work with a grid-enhancing technology company, Line Vision, and I think they're underrated. I, you did list all of these benefits, but I do think that there are these kind of elegant, less expensive options where you can get a lot more bang for your buck with existing transmission and even with new transmission, and, you know, the studies show just incredible results. So first of all, you get, like, just through dynamic line ratings, like, 15 to 20% more transmission capacity if you put dynamic line ratings in. So that's Huge right there. Then, uh, the Brattle Group did a report a couple of years ago just for Kansas and Oklahoma and found that you could enable twice as much renewable energy resource on the grid, um, avoid ninety million metric tons of CO₂, save five billion dollars a year with a six-month payback. I mean, nothing is that cheap. And create 1010 of thousands of jobs permanently operating these systems. And that's just with two states. So in 2024, RMI did a report about PJM, because PJM, as Jigar mentioned, has like a terrible interconnection queue. And they found that you could relieve 6.6 gigawatts by getting solar, wind, and storage on the grid by 20 27 and relieve the queues. It's cheaper. It would be a billion dollars annual savings on production cost. I mean, right off the bat. This is like super low hanging fruit. And the only issue that we have, be…

AI assessment note: “I work with a grid-enhancing technology company, Line Vision, and I think they're underrated.”