Great write up Packy. Love the energy trading play and oversizing the batteries to enable that. Would be worried about how many groups are going after that arbitrage and what that does to the economics. ie If more batteries are charging during off peak times that time slot becomes a peak time of sorts and utility prices will adjust to all that demand from hungry batteries since they are a load.
Also would imagine their BOM costs going up with the tariffs, especially for the batteries and also soft costs with demand for electricians going parabolic and construction costs rising.
The last issue would be the grid interconnection backlog. It’s getting up as high as 7 years in some places. Approvals for a handful of residential installs at a time might be more straightforward but as they start deploying tens of MW of distributed batteries at a time they’re now in the same category as utility scale and will be up against the same interconnection issues, i’d imagine. This is a big reason why behind the meter power solutions are getting so popular.
If they can solve those issues they might have something here.
We’re in a similar boat at Cedar Labs with Vulcan - our behind the meter oxycombustion turbine system for energy intensive facilities. We start BTM and as we scale our distributed fleet we’ll open up our assets for utility use
Then they would change the charge timing to the new cheapest point. If that happens enough, cutting peaks and filling valleys, the electricity price will approach the cheapest possible price, so electricity prices are now based on the cheapest producer at the cheapest time. Base is not obligated to pass 100% of those savings on, and are the only one allowed to demand arbitrage their customers in addition to supply arbitrage, so they are arguing the old build a cable to chicago to be first arbitrage strategy will work.
If they have the technology that lets them kill grid volatility, selling that to regulated will butter their bread just fine.
The problem is it will always be cheaper for the energy producer to have their own batteries to filter out grid volatility, or just simply build more energy production capability on their own site using their current production method. It cuts out the middleman.
The other risk I see is that when/if nuclear energy production capacity increases, it will erode the chances of success of Base’s current business model. You cannot compete with the producers of energy if they produce at volume to lower cost. It will make it impossible for the at-home battery system to pay for itself before it needs to be replaced.
Read about the ADVANCE act signed in 2024.
The act accelerates the development of nuclear tech by streamlining licensing processes and supporting the domestic nuclear energy supply chain.
Base will fundamentally be less economically efficient than the energy producer
Simply is not true.
The efficient colocation is colocation with load (since it allows transmission constraints to be managed as well as generation constraints), which the grid providers in deregulated states are banned from providing (they are regulated entities).
Similarly with drops in firm fixed electricity prices for nuclear.
Nuclear, even new nuclear, would rather not have to throttle, so there still is time mismatch to generate profits.
base profits on the spread between the price that they lock in with the customer, the highest spot prices, and the lowest electricity prices. At any mix with any responsive power at all, They can arbitrage the times between when all electricity is nuclear and solar and when it is from other batteries, nuclear, solar and gas.
This only goes away at the state where there are effectively no peaker plants.
What does "i can kill you peaker plants, let you get away with 100% low carbon" look like to cali, for instance.
Base luckily is in competition with other REPs, not with power providers.
When there is more energy generated (surplus) prices go down. It’s simple supply and demand.
When net prices go down (even if there is still throttling, which there will be less demand for as net power generation increases) there will not be enough margin to arbitrage to pay for the install of a battery that will degrade and need to be replaced.
Furthermore, Base has an incentive that price volatility remains high, with high energy prices, to justify installing their solution. They are not incentivized for lowering energy costs, so it’s not actually solving the root cause problem; i.e. energy is expensive.
Arbitrage is independent of the price. it is the gap between prices.
The profit spread will only close if absolute price movement drops.
Additionally as an REP, they have a natural hedge (Term 36 months) against power price drops, because they have people locked in at a fixed rate.
They are betting on continued power voalitility, as both nuclear, solar, and wind generate big time mismatches. Specifically, so long as they own (get first crack at), some voalitility, they always have counterfactual margin vs going straight to market with those bids, for the same structural reasons as payment for order flow exists.
Why didn't the guys knock on my door when I lived in Texas? But seriously, this is a great update on the previous amazing piece. Packy definitely spend more time focused on the category leaders rather than all the new companies that you can find. I want to read this a second time before I comment properly, but wow.
I have some questions. Maybe I'm missing something about their unit economics, but even if they currently profit by arbitraging energy prices — buying electricity during low-demand, low-cost periods and selling it back during high-demand, high-cost periods — it seems like a fragile opportunity?
In theory, utilities and grid operators could adjust their pricing models over time, flattening the cost differences between peak and off-peak periods. If that happens, wouldn’t it erode the arbitrage margin that Base relies on?
It seems like Base is positioning itself as an intermediary between the consumer and the power company/grid. In efficient markets, middlemen often get squeezed out unless they provide irreplaceable value.
For example: Base consumes energy to store in their batteries: So when they draw energy - prices go up (becuase they are demanding more energy). Then when Base sells back, couldn't the energy company only offer to buy the energy back less than what Base paid, eliminating the positive margin Base would have had?
Base is just storing energy, not generating it. So when they draw energy and store it in batteries, they're just losing energy in the meantime through thermal losses of charging/discharging batteries. I feel like this only it only makes sense if Base was GENERATING power - i.e. they had solar panels on houses. But isn't Tesla already doing that and a decade ahead in battery technology and sophistication overall?
Superb read. "Part of the trick ... is moving as much of the work as possible away from on-site and into the relative order of the factory floor" - have you thought about this in the context of data centers? (Modular data centers?)
I’m most curious about how Base will handle battery EOL. Battery recycling infrastructure is still immature and could lead to exposure in environmental liability, disposal costs, and regulatory concerns. Nevertheless one of the companies I’m cheering for!
I'd like to do a graph with plot-points using all available public data on storage degradation of lithium batteries sold and used in the current market and formulate a cost ratio on a sliding scale relevant to kw/h's per cycle over the course of 10 years. What is $x per kw/h in 2030 using the same battery?
I'd also like to provide an estimated timeframe to advance from the existing low TRL of home based battery technology.
Finally, I'd provide an analysis of the redundancy cost to the business due to a Moore's Law type rapid technological advancement through Chinese battery research and development.
Love this! I’m Harrison, an ex fine dining industry line cook. My stack "The Secret Ingredient" adapts hit restaurant recipes (mostly NYC and L.A.) for easy home cooking.
Really explained the business model well...great piece.
Thanks Chris!
Great write up Packy. Love the energy trading play and oversizing the batteries to enable that. Would be worried about how many groups are going after that arbitrage and what that does to the economics. ie If more batteries are charging during off peak times that time slot becomes a peak time of sorts and utility prices will adjust to all that demand from hungry batteries since they are a load.
Also would imagine their BOM costs going up with the tariffs, especially for the batteries and also soft costs with demand for electricians going parabolic and construction costs rising.
The last issue would be the grid interconnection backlog. It’s getting up as high as 7 years in some places. Approvals for a handful of residential installs at a time might be more straightforward but as they start deploying tens of MW of distributed batteries at a time they’re now in the same category as utility scale and will be up against the same interconnection issues, i’d imagine. This is a big reason why behind the meter power solutions are getting so popular.
If they can solve those issues they might have something here.
We’re in a similar boat at Cedar Labs with Vulcan - our behind the meter oxycombustion turbine system for energy intensive facilities. We start BTM and as we scale our distributed fleet we’ll open up our assets for utility use
that time slot becomes a peak time of sorts
Is not how attempting arbitrage works.
Then they would change the charge timing to the new cheapest point. If that happens enough, cutting peaks and filling valleys, the electricity price will approach the cheapest possible price, so electricity prices are now based on the cheapest producer at the cheapest time. Base is not obligated to pass 100% of those savings on, and are the only one allowed to demand arbitrage their customers in addition to supply arbitrage, so they are arguing the old build a cable to chicago to be first arbitrage strategy will work.
If they have the technology that lets them kill grid volatility, selling that to regulated will butter their bread just fine.
The problem is it will always be cheaper for the energy producer to have their own batteries to filter out grid volatility, or just simply build more energy production capability on their own site using their current production method. It cuts out the middleman.
The other risk I see is that when/if nuclear energy production capacity increases, it will erode the chances of success of Base’s current business model. You cannot compete with the producers of energy if they produce at volume to lower cost. It will make it impossible for the at-home battery system to pay for itself before it needs to be replaced.
Read about the ADVANCE act signed in 2024.
The act accelerates the development of nuclear tech by streamlining licensing processes and supporting the domestic nuclear energy supply chain.
Base will fundamentally be less economically efficient than the energy producer
Simply is not true.
The efficient colocation is colocation with load (since it allows transmission constraints to be managed as well as generation constraints), which the grid providers in deregulated states are banned from providing (they are regulated entities).
Similarly with drops in firm fixed electricity prices for nuclear.
Nuclear, even new nuclear, would rather not have to throttle, so there still is time mismatch to generate profits.
base profits on the spread between the price that they lock in with the customer, the highest spot prices, and the lowest electricity prices. At any mix with any responsive power at all, They can arbitrage the times between when all electricity is nuclear and solar and when it is from other batteries, nuclear, solar and gas.
This only goes away at the state where there are effectively no peaker plants.
What does "i can kill you peaker plants, let you get away with 100% low carbon" look like to cali, for instance.
Base luckily is in competition with other REPs, not with power providers.
When there is more energy generated (surplus) prices go down. It’s simple supply and demand.
When net prices go down (even if there is still throttling, which there will be less demand for as net power generation increases) there will not be enough margin to arbitrage to pay for the install of a battery that will degrade and need to be replaced.
Furthermore, Base has an incentive that price volatility remains high, with high energy prices, to justify installing their solution. They are not incentivized for lowering energy costs, so it’s not actually solving the root cause problem; i.e. energy is expensive.
Does that make sense?
Arbitrage is independent of the price. it is the gap between prices.
The profit spread will only close if absolute price movement drops.
Additionally as an REP, they have a natural hedge (Term 36 months) against power price drops, because they have people locked in at a fixed rate.
They are betting on continued power voalitility, as both nuclear, solar, and wind generate big time mismatches. Specifically, so long as they own (get first crack at), some voalitility, they always have counterfactual margin vs going straight to market with those bids, for the same structural reasons as payment for order flow exists.
Magnitude of arbitrage profits is not independent of absolute price. This is the metric that matters.
Why didn't the guys knock on my door when I lived in Texas? But seriously, this is a great update on the previous amazing piece. Packy definitely spend more time focused on the category leaders rather than all the new companies that you can find. I want to read this a second time before I comment properly, but wow.
Wow great piece and a great business 🚀
Damnnnnn. That’s all I can think after reading this
That’s what I’m going for!
This was a very illuminating (no pun intended) piece. I had read the previous Base article, but this was, pun intended, energizing.
Haha great mix of intentionality
I have some questions. Maybe I'm missing something about their unit economics, but even if they currently profit by arbitraging energy prices — buying electricity during low-demand, low-cost periods and selling it back during high-demand, high-cost periods — it seems like a fragile opportunity?
In theory, utilities and grid operators could adjust their pricing models over time, flattening the cost differences between peak and off-peak periods. If that happens, wouldn’t it erode the arbitrage margin that Base relies on?
It seems like Base is positioning itself as an intermediary between the consumer and the power company/grid. In efficient markets, middlemen often get squeezed out unless they provide irreplaceable value.
For example: Base consumes energy to store in their batteries: So when they draw energy - prices go up (becuase they are demanding more energy). Then when Base sells back, couldn't the energy company only offer to buy the energy back less than what Base paid, eliminating the positive margin Base would have had?
Base is just storing energy, not generating it. So when they draw energy and store it in batteries, they're just losing energy in the meantime through thermal losses of charging/discharging batteries. I feel like this only it only makes sense if Base was GENERATING power - i.e. they had solar panels on houses. But isn't Tesla already doing that and a decade ahead in battery technology and sophistication overall?
Would appreciate some insight on this front.
Superb read. "Part of the trick ... is moving as much of the work as possible away from on-site and into the relative order of the factory floor" - have you thought about this in the context of data centers? (Modular data centers?)
I’m most curious about how Base will handle battery EOL. Battery recycling infrastructure is still immature and could lead to exposure in environmental liability, disposal costs, and regulatory concerns. Nevertheless one of the companies I’m cheering for!
Hi,
I'd like to do a graph with plot-points using all available public data on storage degradation of lithium batteries sold and used in the current market and formulate a cost ratio on a sliding scale relevant to kw/h's per cycle over the course of 10 years. What is $x per kw/h in 2030 using the same battery?
I'd also like to provide an estimated timeframe to advance from the existing low TRL of home based battery technology.
Finally, I'd provide an analysis of the redundancy cost to the business due to a Moore's Law type rapid technological advancement through Chinese battery research and development.
Thank you.
Love this! I’m Harrison, an ex fine dining industry line cook. My stack "The Secret Ingredient" adapts hit restaurant recipes (mostly NYC and L.A.) for easy home cooking.
check us out:
https://thesecretingredient.substack.com