Financing US Battery Storage: Tariffs, Tax Credits, & the Future of Clean Energy | Chris Taylor

Hello and welcome to Transmission. Today, Q is joined by Chris Taylor, CEO at GRIDSTOR, a developer and independent power producer providing power system flexibility with energy storage assets. In this conversation, they discussed grid store strategy as an early mover in the US battery space.

How AI hyperscalers are going to be impacting the US power system and how the inflation reduction act is reshaping the competitive landscape in the US. As always, if you're enjoying transmission, please hit subscribe. And if you'd like more content like this, sign up to Modal Energy's newsletter, The Weekly Dispatch. Let's jump in.

Hello, Chris. Welcome to the podcast. Thank you. Pleasure to be here.

And so before we get started, could you just give us the baseball card for Grid Store? So what's the company, where do you operate, and, what are the key facts?

Yeah. So GRIDstore is a standalone best IPP, to put a lot of acronyms in one sentence. So we are exclusively engaged in the business of developing, acquiring, building, and operating, battery energy storage systems. We're not a technology company.

We're a we're an IPP. In other words, we buy our equipment from different vendors, and we operate in a range of different markets. Our goal is is ownership and operation of assets as opposed to develop and flip. We're backed by Goldman Sachs Asset Management.

And with our story is a little bit unique in that we were a true startup. I was the first employee.

I started in, twenty twenty two. And we've built out a team of almost fifty people, over the past three years and built out, a multi gigawatt pipeline of projects. And pleased to say we'll about to bring another two hundred and twenty megawatt asset online in the next couple of weeks, complementing our sixty megawatt asset in Goleta, California.

But we're a startup that came to life as a you know, with the backing of a of a substantial private equity fund, and we're unique in that we are a sole single portfolio company fund. So the fund that's backing grid store is is just their backing grid store. We know how much capital we have available, and few companies have the luxury of sort of starting with that level of capital backing, which has allowed us to move a lot quickly a lot more quickly than if we were trying to bootstrap our way, along this path. So we've been around about three years.

I I saw somewhere. I think it's on your website or I I can't remember where I've seen it. There's something where Grid Store says about itself, which I I actually rate this. Says it's the the the most, what is it? The the the best capitalized battery developer in the space or something like that because of the Goldman Sachs backing. I thought that was quite, quite a cool thing to say.

Yeah. It's a pretty narrow field of of truly well capitalized US focused, best IPPs.

They were the early movers, which we consider ourselves not a first mover, but an early mover. The first movers, were heavily focused in ERCOT on the merchant revenue thesis. I'm sure you've covered that extensively on this podcast and know a lot about that. Some of those have transitioned, I would put in that category, folks like Jupyter, which has been acquired by BlackRock. They're obviously a serious well capitalized and large competitor. Plus Power, similarly well capitalized, continues to seem to be growing.

And then you've got a few multi techs that have a subsizable storage presence like AIPA.

But a lot of the other storage, players are just a lot more thinly capitalized and as we'll get into in a moment, there's a lot of headwinds coming that I think are going to make it difficult sailing if you don't have adequate capital backing in this current market environment.

And so just to set the scene then, so you where are your assets? Where are you what's your focus in the US?

Yeah. So we're based in Portland, Oregon. About half the team is is here where I'm, based as well and speaking to you from today. And then we've got a satellite office in Los Angeles, another in Denver, and then some distributed staff closer to where our projects are. Our operational assets, like most best developers, our first operational assets are in California and Texas markets. Those still represent the lion's share of deployments in the US.

So we have one project we brought online at the end of twenty three, called Galita, which is a sixty megawatt project using Tesla batteries near Santa Barbara, California.

That's got a long term RA contract with Southern California Edison, and we're operating the balanced merchant. And then we're bringing online a two hundred twenty megawatt asset near League City, Texas, which is just south of Houston, which will be operational, you know, imminently in the next couple of weeks. And then, we've got a a large portfolio of of development assets that stretch basically from the WEC or CAISO and the rest of the west through SPP in the central part of the of the US into ERCOT.

And we're not very active so far on in the Northeast, New York, and and MISO. We see PGM and MISO as as attractive markets for storage, and we see increasing customer interest in those markets. But the length of the queue and the time it would take you to get a project in the ground in those markets is so lengthy that we're likely to enter those markets through an m and a approach as opposed to greenfield. All the other markets I mentioned are places where we're actively developing greenfield projects, and then in some cases, complementing that with m and a.

So all the operational assets I'm I referenced are are projects we acquired at some stage of development. But, ultimately, we're a soup to nuts developer, and we wanna be bringing online projects that we developed ourselves. But given the length of the interconnection queue, you know, the only way to get near term CODs is to acquire projects that are further along. So that's our geographic focus.

It's basically the central to the western US.

In terms of our sort of customer focused approach and our sort of strategic thinking about the market, you know, we came into the market after, you know, the things in Texas had started to cool down a bit in terms of the ancillary prices had come down, and people were waiting to see what would happen with merchant arbitrage. Similarly, in California over the last couple of years, you've seen a precipitous decline in both markets of the available, arbitrage revenue. And by that, it's irrespective of how good you are at capturing that revenue, how much revenue is there even theoretically to capture has declined quite substantially.

And that's a success story at a macro level. It's a wonderful thing for the consumers in those two states. Like, they have reliable power. They've avoided blackouts, and they've procured these services very cost effectively.

You know, the only losers in that game are really people like us that are operating those assets. So I think that's given us and anybody else who's paying attention pause about what's the durability in the long term future of ARB based revenue streams. It's basically a success story of a lot of batteries getting deployed and bringing down that price. And Texas this summer is a great example.

We've seen sustained heat, maybe not extraordinary heat, but it's not been a cool summer in Texas, and yet prices have not spiked. And that's almost exclusively due to batteries. If you really decompose that story, batteries are the reason that you haven't seen price spikes. So that leads us to think that the the the better path for people like us is to find customers that are willing to enter into long term contracts for the services that batteries can provide.

That could be utilities under something like a toll. It could be some kind of, behind the meter solution working with industrial customers, whether that's hyperscale data centers, LNG facilities, or others. Or it could be trading shops like in Texas. There's people that have, you know, exposure where they've committed to serving customers in certain hours, and they wanna insulate themselves from potential price spikes by acquiring, you know, the output of a battery.

So we're we're very focused on locking in long term contracted revenues wherever it is that we're building these projects and really trying to minimize. We think there's a there's some merchant exposure makes sense, but having that be the bulk of your revenues for a a platform of our size doesn't seem like the right approach to us.

You touched on something there I was gonna ask you about later, but I'll do it now. So you mentioned data centers. And your background you you got some really interesting experience that's probably massively value add in what you do now. So you're at Google, and you were doing data center stuff before it was cool or before it was as as cool as it is now, I think it's fair to say.

Right? Yeah. And, before that, you're you've cofounded Element. So can you tell me a little bit or our audience a little bit about your experience doing the data center development.

And with that, how you think about the impact of data centers on the battery business case now? It's a bit of a it's a compound question, if you'll forgive me.

No. It's a great question. So I was fortunate to spend seven years of my career at Google after, about fifteen years of or close to fifteen years of IPP experience.

And, you know, Google was was becoming one of the largest energy consumers on the face of the Earth. The top four hyperscalers now are the biggest energy consumers, which is kind of an amazing fact that utilities are no longer the biggest buyers of of what people like us have to sell. It's actually these end users.

What I learned from that I learned a lot about sort of a company culture and HR that that has really shaped the way good store culture has has evolved. I didn't try to copy everything from Google, but I learned some really valuable lessons. They have a I was fortunate to be there in the in the Larry and Sergey days before Google kind of became a more traditional company, and and I think they had some very enlightened ideas that that I've tried to replicate, in terms of how we built the culture here. But specifically on data centers, what I learned there is that data centers, unlike utilities and most other power buyers, they care much more about speed and certainty than anything else.

At the end of the day, they have a very lucrative business that needs to grow rapidly, and they're competing against each other in a in a race to see who's gonna dominate the AI space and the cloud space. And I have yet to meet another customer class that has the level of willingness to to make big commitments quickly, the credit to backstop those those commitments, and just a level of ambition around climate that no other industry that has that kind of money has ever demonstrated in the history of the world. Like, they're actually willing to spend real money to build things and trying to do it the right way.

And I just think that the ability to do things quickly and at scale when you've got motivated counterparties like that is is somewhat unparalleled.

They face a very difficult challenge of trying to find enough capacity, to build the the level of of facilities that they need to build, and the new sources of capacity are quite limited right now, especially with all the stuff that the administration is doing.

A new gas turbine is five years out on a good day, and that also assumes that you can get your air quality permits, which is not necessarily a foregone conclusion, and that there's enough there's ample gas supply at that location. And and the gas grid I'm not a gas expert the way I'm in electricity, but the gas grid is not, like, some perfect thing. It's somewhat more similar to the electricity grid that it's it's, you know, needs to be expanded, needs to be reinforced, and there's not enough gas to deliver for a bunch of five hundred megawatt gas plants wherever the heck you wanna put them. So batteries plus something else are really the only near term source of of of, of capacity.

And I'm I'm actually even though I started my life as an environmental advocate and regulator, I'm actually, you know, unabashedly pro nuke because it is a carbon free baseload resource. But that's not happening between now and twenty thirty. Not even the CEOs of the nuclear companies would tell you that, I don't think, because it's not it's not gonna happen. So we think the next five years, batteries are gonna have, a good run because it's really the only game in town right now.

We can build them in nine months. The costs keep coming down. I think even with the loss of some of the subsidies and incentives, batteries will remain a cost effective solution. It's not the only solution.

We need long duration and multiday storage also.

But in the near term, we need shorter duration storage at scale, and and we think that that's gonna be a great opportunity.

And so you're now thinking then to take that a step further. Are you thinking about potentially the hyperscalers being a a long term offtake partner or the the a counterparty in a tolling agreement? Are we do you think we're gonna see it's a bit of a leading question because I do think this is gonna happen, but my belief is we're gonna see these hyperscalism, huge demand, you know, power demand, hungry, companies will start doing offtake agreements directly with batteries for a range of either services or mitigation of climate and carbon or some sort of combination of the two. It won't necessarily be co collocated, I I think.

Correct. So I think there's an op I think there's multiple different paths to market there, and I think all the things you mentioned are are very real possibilities. So there are active procurements going on right now. We've seen a procurement from Meta directly for batteries.

Google has one on the street right now in one, one region of the country. So we're already seeing the first hyperscaler broad scale public RFPs specifically seeking storage. So that's actually, you know those RFPs are ongoing. I don't know if they've announced any final deals, but, like, I I assume that they will ultimately consummate transactions and that deals will get signed.

So I think we're seeing the very first wave of those. And I think, you know, if you look at what happened with wind and solar, they went from doing, you know, a few projects to doing gigawatts of projects a year. We hope that'll be a similar trend for storage. And, yes, I think it could be I think these projects could take two forms.

I think one would be a noncolocated, like, a grid connected battery that's most likely in the same balancing authority or load serving entity service territories. Whoever the local utility is, it's probably connected to that system from a reliability standpoint. And it's probably a three way deal where, ultimately, the data center is paying for that incremental cost, but it's probably sleeved through some kind of a contract with the utility that provides service with them.

So that's, I think, one model that we're actively pursuing. And then the other model would be some kind of behind the meter solution where you're hearing about a lot of these new, AI data centers that are seeking to build basically an islanded grid. In other words, they don't they can't afford to wait until they can get full grid connection, so they're trying to locate their data center next to a generation source, whether it's renewable or gas or whatever.

To do that, I think adding a battery to the mix makes that a much more viable solution if you're trying to do that. So and then the ultimate aim would be to connect that island system to the grid once that grid connection is available. So you might operate this thing as a micro grid or an islanded network for three to five years, however long it takes to get connected to the grid, and then you'd connect to the grid. I think that's a very viable solution. A lot of people are talking about it. I haven't seen a deal get signed yet, or a project get built along those lines, but I will be shocked if that doesn't happen in the next couple of years.

Interesting.

And the other piece of this is AI loads.

And when I was at Google, we were mostly focused on traditional data center, cloud type data centers.

But for AI, the the level of of, fluctuation in those loads is beyond anything that that traditional data centers generate. You can see tens to hundred megawatt, variations in in load in in seconds, and that just wreaks havoc on the grid. It's a grid operator's worst nightmare, but there's not a heck of a lot that the that the data center operators can do about it. Well, if you put a battery behind that, you can absorb those fluctuations and have the battery take basically take the abuse that's coming from the the data center instead of inflicting that on the grid operator. And batteries are actually really well designed for that purpose, and we think that's another use case.

So now to move to something that a lot of our audience will be will care very deeply about, the big beautiful bill and the impact on batteries. And we should probably timestamp this conversation. So we're doing this on August fourteenth, and so we haven't we haven't yet had the guidance that we expect in the next week or so.

But I know, Chris, you've done a lot of thinking about this and the impact. So could could you just start with if you could frame this discussion for, especially, you know, our our our listeners who are outside the US, the why are we talking about the big beautiful bill in the world of energy storage? And then we're gonna go we'll zoom in and zoom in on that. But if you can start big, and then we'll we'll we'll go down the rabbit hole.

Yeah. So the as it regards renewable energy broadly and and batteries more specifically, the main impacts of the budget reconciliation bill were curtailing the the subsidies available under the inflation reduction act.

And what's anticipated is that, you know, there's a there's a near term phase out for when the solar projects have to start construction and then be in the ground, basically by next year in order to qualify for, the those incentives. For batteries, they now the the the that was not cut off the way it was for other technologies.

There's some so wind and solar projects that do not achieve start of construction status and actually complete construction within a narrow time frame, unless the rules change, will not be eligible for tax credits. Now there's a for batteries, the issue has to do with this pending guidance that you mentioned that's coming out supposedly next week that will clarify what counts, in terms of start of construction and how that relates to foreign entities of concern. So for batteries, our main concern is that eighty something percent of the production of LFP batteries is in China globally. That's just the reality today.

And the level of domestic supply in the US is not nearly, as large as the demand. So right now, it's not obvious how domestic supply can fill all that demand. And the bill has significant restrictions on Chinese based companies and eligibility for tax credits. And it's expected that the rules will be much more onerous for wind and solar and probably won't have much to say about about storage.

So for all the technologies, a lot of companies have been doing long lead procurement and and effectively what we call safe harboring projects by engaging in work of a physical nature and advancing these projects and making binding commitments of a certain amount of money, to demonstrate that you've, quote, unquote, started construction on those projects. We and other well capitalized shops have gone out and taken a lot of proactive measures to to do that, and we think that as long as the rules stay roughly the way they are today, we will have effectively safe harbored enough projects to build for the next several years, and meet meet our needs.

That is a big thing that's affecting people. And companies that don't have either the procurement savvy or the capital or the risk tolerance to go out and do that are gonna it's gonna be a very different scenario because they're gonna be facing folks like us will have a thirty or forty percent tax credit, under you know, behind the project, and they won't, and that'll make their projects more expensive. So I think in a competitive marketplace, those who have access to tax credits will will win.

Absolutely. So so so what does that mean in practice then? How how do you actually do that? How do you actually lock that in?

Yeah. So there's a variety of of of ways of doing this, and this has been all it's all largely derivative of what was done for wind and solar because those rules have been around a lot longer, and those technologies have been around a lot longer. And and, historically, the the two ways people did this was to either go start if you already have all your permits, you could actually go start working with physical nature, like start, you know, cutting the roads, start, you know, digging the foundations, start doing actual construction work. But permits don't have an infinite shelf life, and you actually finish the project.

So it's often infeasible to do what I just described. So instead, people, you can contract with vendors to build, like, bespoke equipment that is designated for a specific project, such as a main power transformer. It has to be a specific voltage, a specific capacity, other specific characteristics that are that you design for. And then you and you designate this I am buying this transformer for this project and the name of this project company.

And then you have the manufacturer go out and do physical work, actually start making the transformer and document all that work and how many hours and how much money and take pictures of it and prove that you were doing this work.

And then continue to advance those projects. Keep advancing the permitting. Keep advancing the interconnect. You can't just buy some equipment and do nothing else and and be safe.

So you have to legitimately be advancing these projects towards completion. So it's a lot of work. It's a lot of coordination between procurement and legal and construction and other things. And and and it's it's not an easy, road, but those of us who've navigated this before in wind and solar or the earlier stages of batteries have some experience in that.

That's what we're leveraging.

So thinking about this, you can you can almost apply a portfolio effect to it. So you all you're doing is you're you're you're bringing forward some of, despite some uncertainty on the projects, you're saying, right. We're gonna go ahead with it despite the uncertainty. But then across a portfolio, that should sort of even itself out even if you have to spend some money on some projects that may not materialize in the way that you expected or whatever, because the benefit of the tax credit is so valuable if you can lock that in. And, yes, for our for our listeners then, so could you just talk a little bit more about the timing of this? Because it really is miraculous how how this this entire landscape has changed so quickly. So the timing and then also just a quick reminder on and then I wanna ask you about it, on the domestic content element because we wanna talk about that.

So, I mean, some of us started taking action as soon as Trump was elected. So we we went out and procured batteries before tariffs or fiat or anything else. As soon as before he even took office, we placed orders and and got equipment into the country in advance of tariff moves or other restrictions.

And then as more policy, changes became evident, we ramped up our level of activity. We started this immediately after the last election, and I think a lot of other companies that are similarly situated did that. But as the tariff pressures ratcheted up and that became so uncertain, I mean, I I'm in my fifties and I've never seen tariff policy change, like, on a daily basis couple times in one day.

Even now, we're doing it at a company level, right, with the NVIDIA move, and it looks like that could be a new move in policy too.

And does it something that's announced on truth social counts as federal policy? I don't know. But it's you know, I have an advanced degree in public policy, and I gotta tell you that this last couple years defies every rule I was ever taught. So, it's it's been a very uncertain environment. The other piece I wanted to mention that I I neglected is of what I think the big beautiful bill is doing is it's create sorting it's people are calling it the great sorting. It's gonna be companies that have the risk tolerance and the capital and the and the expertise to survive and the grit to survive these adverse conditions.

Grit to survive these adverse conditions, I think, will actually be successful in the end, but it's gonna have a very negative effect on those firms that don't have those things. And one of the big divisions I'm seeing already and I'm seeing other industry observers start to talk about it is is a division between people whose capital is resides overseas and and resides in the United States. And this is a place where I feel like we have yet another advantage because we are well capitalized.

We're a small team. We have only fifty people. Most of my competitors, I mentioned, have two hundred, so their their burn rate's a little higher than ours. But we also my capital is managed in the United States, and so the people I'm dealing with are living with whatever US policy is across the board all day every day. And as you, I'm sure, know, much of the renewable energy industry in the United States is backed by capital from Europe, Asia, and other parts of the world. And there's a clear distinction that the foreign investors are much more spooked and under much more political pressure to pull back from the US and more likely to act what I would describe as quasi irrationally.

And I think those of us who can kind of read the forest for the trees and and and stay stay on track, you know, there are gonna be fewer people left at the end of all this. I think that's a that's a solid outcome of this that you can you can basically see today that's already happening.

And so what about the how do you think about the domestic content element to it? So for the for our listeners, you you the the subsidy that you get, one of the things that takes or took me some time to get my head around is how much, tax credits and the tax mechanism is used in the US for all sorts of things, which are in in in much more creative and fruity ways than I I knew from back in Europe. But so so when we talk about tax credits, we're talking about subsidies for these projects, and you get different different subsidies for different types of thing. But one key part of that is how much of this battery asset or how much of this asset has been produced domestically? So how much of how much of it is made in America?

And so that's quite a tricky thing for battery assets because the supply chains are very global. So how do you think about that, Chris, for you and your projects?

And, yeah, well, have you got any insights on on on what you're really doing on the ground to manage that? Because I imagine there's all sorts of, just like you mentioned earlier about getting transformers ordered. I'm sure there's, there's there's all sorts of creative things you're thinking about.

Yeah. I think well, first of all, it starts I mean, maybe for zooming out for people who are less familiar, there's a fundamental, like, are you buying from an integrator, or are you buying directly from subcomponent manufacturers and doing self integration? We've done both. Our Galita project was a Tesla project, and Tesla is a turnkey, provider. So they they they actually install the units. They they procure the cells from third parties. They they build the enclosures.

They build the full AC system, and then they deliver it and and maintain it. That's not uncommon for your first project that you would take that route because it's it's safer and easier for a smaller team. But on our second project, we went from doing that on Goleta for our next project, Hidden Lakes, which is four times larger in Texas.

We procured those batteries directly, from BYD at a DC block configuration, and then we did the rest of the integration ourselves. So we bought the the the inverters and some of the other hardware and software, packaged it up, and then had a EPC build it for us. You can save significant money that way. Obviously, integrators charge a margin. And if you're building at scale the way we are, it makes economic sense to invest do that. But once you have that team, you can save a lot of money by building these projects yourself.

So if you're positioned like us and you can buy a DC block from whomever and integrate it yourself, your options are broader than if you have to buy from an integrator. There's only a handful of credible integrators. But there's a number of credible DC block providers. Basically, all the tier one manufacturers can sell you that. In terms of domestic content, there's a handful of options out there. Fluence and Tesla both believe that their products will meet domestic content, but it's not the case that all of the cells that they're putting in those units are being made in America. The cell is really the piece that's mostly still made overseas.

The enclosures are mostly made here. It's pretty easy to find US made inverters and some of the other bits and pieces. It's really the cells that are hard to get domestically. There are US cell lines that are being stood up. We went and visited the one that LG has built in Holland, Michigan recently.

Really impressive facility.

They did They were trying to say It's massive.

So it started as an EV vehicle battery manufacturing facility, and it's why it's in Michigan. And now they're expanding specifically for stationary storage. But they even went so far as to make sure all the manufacturing equipment that you see in the factory didn't come from China either. That all came from Europe or some other country.

They've tried to source all their raw materials, the actual minerals, from non Chinese sources and and I'd say they have a pretty strong argument that they have a domestic content compliant product. But there's also AESC, which is building a fact the factory in in Tennessee.

But that's kind of it. There's a bunch of other people that are saying they're gonna do it, but whether they really are aren't depends. So there's and there's two types of tax credits that are relevant here. There's whether or not in other words, you have to have a certain percentage of US content to to avail yourself of the ITC based on these new rules.

But then secondly, a domestic manufacturer can receive tax credits as a manufacturer under a different part of the tax code. And what happens with those is deeply important because the economics of these factories assume both. Right? It assume that customers will pay a certain amount because they're gonna get a tax credit when they build the project and assumes that the manufacturer is gonna get a tax credit because building things in America is more expensive than in China.

I hope that answers that. I'd that's about the shortest answer I can give to a really complicated question. But we think domestic manufacturing will continue to to grow, but the existence and the stability of those manufacturing tax credits, I think that's forty five x, As long as those stick around, we think there will be more factories built in America, but people need to believe that they're gonna get those. And it's a tough decision to make when policy gets changed this fast.

These people are investing, like, a billion plus in these factories. They need to know whether that's gonna be available or not.

But the demand is here, and I think, I mean, I think from my earlier comment, storage will continue to grow, and I think manufacturers see that being in America is gonna be important to their continued success. It's just gonna take a couple years.

There's still so much to figure out, in in practicality.

So it makes it fun, though.

Yeah. Yeah. Yeah.

Moment in this business. That's for sure.

So so let me ask you then more about Grid Store's approach. So so when you build an asset, how are you getting it into the market? You you building you building your own team to trade and optimize it, or are you using third parties?

How are you thinking about that problem? And especially as you scale, I mean, what what's the what's the big vision here for operating these things?

Great question. And I would I would say that in in all candor, my my views on that have evolved a lot over the last three years. So when we started the company, most of the early movers, in fact, almost all of the early movers in the space had built up a sizable in house training and optimization, division, like, you know, sometimes ten people, millions of dollars a year in in headcount costs. Because at the time, there were no third party services available to do this. So if you wanted to engage in battery training and optimization, you had to learn how to do it yourself and hire the expertise.

As we were starting to bring our first project online, we saw the emergence of a number of different competing third parties offering to provide that service for a fee. And my thesis was, well, if you're if you're doing that as a service provider for fifty or a hundred batteries, you have a much larger dataset, a much richer amount of information. You assuming you're both equally skilled, somebody with a hundred sites should be much better than someone with two sites.

So I had to convince myself, do I really think that we're gonna be so much better even though we'll have less data than someone with a bigger portfolio? So we started with, third party, but why by engaging a third party for our Goleta asset. They don't actually optimize it, but we subscribe to a service and they provide their recommendations of how we should dispatch the battery, and they have different flavors you can pick. And we've ended up with a comp with something that's kind of a hybrid where we use their inputs, but there's places where we think they'd miss certain things.

And so we use human judgment to adjust some of those forecasts and those trading decisions, based on our own observations, based on real time market conditions. So it's we have the ability to override what the third party is suggesting, and we get to decide, and we have people that do that. For our second asset in California, we're in Texas, we're taking a different approach. We're engaging I don't know if it's public yet, but we're engaging with a big well known brand that also does a lot of power trading in ERCOT.

So they're already trading their own book, and they have lots of capital on the line. And that actually makes me feel better because they're making similar decisions for things that they own, and they're wearing the risk of that. Whereas most of these third parties that give you battery dispatch algorithms, they're just getting paid a fee whether they're right or wrong. These guys are making commitments with their own assets and their own resources alongside us.

And we haven't started operating it yet, but we're trying a different approach there. And what level of in house resources you truly need, I think, is still TBD. My my thesis is those third parties will continue to get smarter. Some will emerge to be better than others.

And I get to see what happens with my competitors, whether it's worth having ten really expensive people doing that or whether I should just outsource it. It also depends on how much of your operating base is going to be exposed to merchant. If you're signing tolls and these other kinds of deals we talked about, you don't need those people. I mean, your the the toll counterpart is gonna decide what they wanna do with it.

So for me, it's a question of scaling my business and and my resources appropriately to the size of the problem. I don't wanna go build a trading shop that can manage a gigawatt of merchant if I don't end up with a gigawatt of merchant.

So that's not a totally satisfactory answer probably, but that's my view of this is that the third parties are getting better. Someone's gonna figure this out, and there'll be a you know, some investors may have different opinions, but I'm I'm not convinced that the key to being a successful best IPP is to have the biggest and best trading and optimization team. I think you need to be good at that, and we've hired people that are good at that. But I think creative structuring of long term contracted offtake is probably gonna add more value to the platform in the long run.

You know, it's funny. Doing my job is a great privilege. I get to see lots of different markets around the world and sort of, jack of all trades now master of none. Very, very little detail for me in the last few years. But one of the things that is stark and very clear is how different the US approach has been. So in Europe and in Australia, you had the emergence of optimizers and off takers and some utilities providing some pretty creative contracts.

And the biggest asset owners and managers don't do the optimization themselves because the optimizer the optimizer market is so competitive and you've got so so many skilled teams building optimizer, companies that, actually, they'd rather give it to them. But in the US, that didn't seem to be the the the plan for the first few years. There seemed to be a a real push for it to be for vertical vertical integration was the thing. And it's not really a solved problem how this is gonna shake out. I'm with you. It's it's it's gonna be interesting to follow.

But optimizing in these markets is getting more and more complicated, and, we shall see.

I think that's the kind of the beauty, though, of of what we've done is that if the parties we've selected initially, if they don't evolve well in response to changing market conditions and their competitors do, we can always those are kind of annual contracts that you can terminate pretty easily and move to somebody else who has been the best to adapt to those new conditions. Because you're absolutely right. Like, the strategy for success in both GEICO and ERCOT has changed just in the tenure that I've been in this job. It's changed a lot.

So if you were great and then one of my really foundational thesis about I've been in the IPP space since two thousand and two, and I've said this to my team probably a hundred times, but it's my fervent belief that success or failure in the long term in our business is almost exclusively down to one thing, how well you can pivot and evolve. Because this business is so dynamic, and it moves so fast. Even if you're the best, you are the top one percentile at today's market conditions, that and five bucks will get you a cup of coffee. Because today's market conditions are gonna change.

And if you aren't good at the new thing and you can't catch up and pivot and change, then and you just keep trying to do the thing you were good at before. So say you were good at Texas arbitrary, ancillary revenues capture. Well, that's nice, but that's worth two bucks a kilowatt month now. So, like, again, that and five bucks will get you a cup of coffee.

That just isn't an adequate basis for a successful business. So I really think that the key to success is knowing that whatever today's conditions are, they're transitory. You You need to be good at them, but you need to be thinking about what's coming next and how am I gonna be good at that also. And that's ultimately, I think, what what dictates the success or failure of of franchises like ours over the long run is being able to pivot.

And by not investing huge amounts of resources in it in that particular thing, I can decide when and if it's the right time to deploy that instead of, you know, having that fixed cost hanging over us on an ongoing basis. But it it is definitely unsettled and uncertain, and that happens to be my view, but it could be it could prove to be something else.

I can tell you love it. You love the uncertainty. I can I can see I can see it?

It's fun. It's exciting. You gotta you gotta make tough decisions every day. The other thing I've mentioned, and I I don't have as much data to back this up as I'd like to have because I'm too busy to spend time researching it.

But I'm pretty certain this is true that in my lifetime, and probably in anyone's lifetime, there I don't think there's ever been a brand new type of energy generation technology that's ever been deployed at such a massive scale in such a short time. I mean, if you think you've got, like, ten more than ten gigawatts built in California and Texas in a few years, like, when does that ever happen? We didn't just go build tens of gigawatts of nukes in four years. It takes longer than that to build one nuke plant.

So I don't think the world's ever seen this many things of a brand new technology get built this quick, and it's so different than anything else. It's kind of a different category that the level of dynamism in our business is really unparalleled, and people, I think, fail to appreciate that. I live through wind and solar going from nothing to massive, and that seemed like a wild ride. It seemed like it was changing every year.

This is moving four x faster than Winder Solar did. And I think most people like me who've been through both of those would agree with me that the the pace of change for storage has been truly unbelievable. It's more like technology or, you know, being in the tech sector than than in infrastructure.

I guess that's what's interesting about I like infrastructure, but this is, like, fast moving dynamic infrastructure, which is not usually a thing.

Yeah. Yeah. It's it's well, it's the beauty of a technology s curve and all the benefits of a solid state kinda technology improvement, and then, the beauty of infrastructure, which is building big, interesting things that actually solve problems for the world. Not that, you know, building an m p three player doesn't solve a problem for m p three player. What on earth was that? Where did that come from? What what?

Right.

Are you old enough to know what an MP three player is?

I don't even know where that came. I don't even know what part of my brain that came from. Right. We're gonna move on.

We're gonna move on. I'm gonna ask you now, well, actually, a good story that we need to celebrate, and then I'm gonna do your the the last two questions about the contrarian view. So batteries are often in the news. There's a bit of a bait and switch in this question, which I think you know is coming.

So batteries are often in the news for fires, which is obviously a a terrible thing. However, we're about to talk about batteries in the news for fires for a good thing. So the Gallita project, your sixty megawatt site in California, was in the headlines because of well, you can tell tell tell us about it, what happened in the wildfires.

It's a it is really a great story. So our Goleta project is located in a really unique part of California.

That area of Santa Barbara, this is a very nuanced niche issue, but is roughly on the border of where Southern California Edison and Pacific Gas and Electric Service territories meet. So the the electricity for that region of the Central Coast is all served by one high voltage line that comes up from the south from from Southern California through the mountains and down into Santa Barbara. If that line gets taken out due to wildfire, earthquake, whatever, they lose all power because there's no it's a one way line. It's a radial line.

There's no way to serve it from the north. And that was part of the reason, I think, that the community really welcomed this project. Goleta is not an easy place to build anything. It's among the most difficult jurisdictions in America to to to get a permit for just about anything.

But they have experienced blackouts and extended outages, and they understand the risks that they're subject to, and they were very supportive. So what happened, we had a we had a, during the the the wildfires last year in California, there was an emergency event. It was the Mountain Fire, which is in Ventura County, which is south of us. And that caused CAISO to issue an emergency order to be able to manage the grid and ensure continuous service because they were going to have to take lines out of service to avoid wildfire risk.

And they basically took over the operation of our Goleta asset, and they were able to to keep running it through this system wide emergency and keep delivering power reliably to that local area that they would not have been able to do if Calida hadn't been online. So we've already had a situation where that project actually did what most of the locals care about, which is keep the lights on when they otherwise would have lost power. So there was thousands of people being evacuated. It was a major natural disaster, but this project was able to help CAISO manage a really difficult situation without loss of service.

It's great to hear that story because there is so much fear, uncertainty, and doubt spread about batteries, especially you know, it's been tricky in California. You know better than anyone. It's been tricky in California for that reason. I'm sure you've got some battle scars.

And so We have to permit the augmentation of the Galita project.

So we're having public hearings, like, in the next few weeks on that. So, yeah, it's it's a thing that we face on a daily basis.

And I'm sure you know this, but just for listeners who don't, the the key story to know about battery fires is that the overwhelming majority of battery fires that have occurred in the United States and everywhere in the world were a different chemistry and a different design than what everyone, including us, is building today. They're almost exclusively NMC chemistry versus LFP chemistry. It's fundamentally different elements in there. All three letters are different. They're just different elements.

And then secondly, most of the fires have been in indoor in, you know, enclosed facilities, which is not best practice. So all of our facilities are outdoors. They're not inside of the building. They're all LFP, and they're all separated enough that even if one of them had a thermal runway event, it wouldn't it wouldn't propagate to the rest of the the project. And it's just to the average person, these things all look and sound the same, and it's hard to explain these differences. But they're pretty fundamental, and it doesn't take a long time to appreciate.

There are some pretty significant differences between what's caused problems and what we're building today.

I noticed on your website doing doing some research before this that you you you make a big point about, about that about about safety, which is obviously core to your strategy. I'm now gonna ask you our last few questions. So the first one is, do you have anything to plug? Is there anything that you think our listeners should hear? And then the second one is the most exciting one, of course, is your contrarian view. I'm sure, Chris, you show loads of those. But first one, any anything you wanna plug?

Yeah. I just think people, don't fully appreciate what a game changer storage is. As someone who's been building intermittent sources of clean energy for twenty something years, wind and solar, you know, that was always the first question we always got everywhere we went. It's what are you gonna do when the wind's not blowing and the sun's not shining?

And we had some pretty hand wavy answers for that back in the day, but now there's an actual real solution that works. And there has never been anything that you could put on the grid at scale that did what batteries do. Pumping water uphill requires a very specific set of geologic conditions that are not present. I mean, how many places in England have that kind of, you know, topography?

In a lot of parts of the world, there's not enough water, there's not enough topography to do that. And it's just it's a basic law of physics. You're not gonna get to eighty seven percent round trip efficiency doing that. It's it's it's not gonna happen.

So batteries have given us the ability to do things we never had. And the other little thing I would just plug is, look at a curtailment report from CAISO or ERCOT. Look at how many thousands of megawatt hours every single day are being curtailed. Curtailed means shut down because the transmission system can't handle it.

This is energy that's been bought and paid for, produced in America, zero cost, zero fossil fuels, zero emissions, and we're shutting it down because we don't have a way to use it. Well, that's what we're doing with these batteries. We're taking that homegrown energy, storing it when it can't be used in that moment, and giving it back when we really need it. And that's that kind of basic explanation, I think, demystifies some of all of the tech wonkery that I've been blathering on about, but that's fundamentally why this is exciting.

Alright. And now now onto your contrarian view then. What do you believe, Chris, that not a lot of other people believe?

Yeah. Well, I think I think a couple of things. I think that they're I mean, I think some people still think that storage should be co located with wind and and solar out where the the renewables are being generated. Our focus, as you can see from where we're operating, is is not that.

Our our view is you should go to where the demand is, and you wanna be on the right side of a transmission constraint so you can fill up your battery when power is abundant and and low carbon, and that you can when the when the system is tight and the transmission is is stretched thin, you're on the right side of those con of those congestion constraints, and you can deliver that power directly to the load under any conditions. That's somewhat of a contrary insight philosophy. Some of our competitors do that, but other people take a completely different approach to that. We have a pretty strong thesis as to why we think that's more valuable because it's delivering the energy where it's needed.

So I think that's that's something that we really, have leaned into. I think being tech agnostic, you know, a lot of you see a lot of companies in my space signing big framework agreements with just one OEM.

That's not been our approach. We're signing agreements with lots of different OEMs because it's very unclear today who the final winner is gonna be. There's a bunch of really serious companies that are very well capitalized that make excellent high quality batteries. So for us, there's no reason to pick a winner today. We want to continue to have partnerships with lots of different firms in different geographies, US, China, non US, non China.

So domestic, cheapest global price, and something in between. I think going all in on any one of those is a mistake and something we've avoided. And I think another difference is people need to think about leverage differently in this business. Because if you're taking merchant risk, you don't know exactly what your revenue is gonna be.

And in wind and solar, the game has always been to get as much leverage as you can. Every last dollar the bank will give you, you should take it. I'm not sure that's the smart way to do things in storage, because then then you basically gotta operate your battery with a team of creditors, and I don't I don't think that's necessarily the right thing to do. So I think those are those are a few things that we think somewhat constrained about.

And I think my general view is that, even though the Trump administration has a very clear, you know, lack of love and and active antipathy towards wind and solar, I haven't seen that for storage, and I do think that at the end of the day, if you listen to Trump's words and what he says he wants, he wants energy dominance. Well, it's a dirty little secret that frac jobs run on electricity.

You know what else runs on electricity? LNG plants. To to to take LNG and put it on a ship uses electricity. That that's just that's just a fact.

So AI dominance, energy dominance, many of the US manufacturing, those things all require gigawatts of electricity. And the only way we're gonna make that happen during his administration is gonna involve a lot of batteries. So I think you need to focus on what are the outcomes that that they want. And if you believe that they're gonna drive towards those outcomes, it's gonna drag storage along with it.

That that's, I think, another contrarian view that that we have. So those are some of the things I think we're we're very focused on on exploiting. And, also, picking what what's the next California or Texas? I mean, we didn't talk about this.

I'm sure you have on your show. But, like, those two states got to where they are by going very different ways. Right? Texas has no regulation and no mandates and no incentives, and California has incentives, mandates, and lots of regulation, and they're the two biggest markets for battery storage.

So what will the next market be and why?

I think, you know, I'm very bullish on states with hundred percent or close to it renewable energy mandates.

I live in the west and, you know, follow western politics closely. I don't think these states are gonna abandon their principles. I think they're gonna double down on them, And I think the only way they're gonna get to a hundred percent clean is with a lot of batteries. So focusing on jurisdictions that have a clear mandate for this, which represent most of the load in the United States. It's not you know, it's it's a it's a small majority of states, but it's most of the population, which means most of the load.

It's great to hear someone, despite all of the the complications of the big beautiful bill and, and everything that comes along with that, someone who seems to enjoy it and just just just so positive. It's, it's it's been really great talking to you, Chris. So, if you're interested in what, Chris and the team at Grid Store are up to, you can go on the website. We're gonna put some links in the show notes. We could have done a three hour episode and gone through all sorts of stuff here, but, we had to keep it fairly short. So maybe we'll have you again on, on again another time, Chris. But, yeah, do do find out about Grid Store, and, thanks for coming and joining us on the podcast, Chris.

Thanks so much for the opportunity. It's been a real pleasure.