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A fast-growing startup is giving Texas homeowners cheap access to unusually large batteries for backup power — and paying for it by maneuvering those same batteries in the state’s ERCOT energy markets.
Base Power launched last May and already has installed more than 1,000 home batteries, around 30 megawatt-hours, in North Austin and the Fort Worth area, CEO Zach Dell told Canary Media recently. The company plans to expand that footprint to 250 megawatt-hours this year, he added.
To make good on that promise, the 80-person startup rolled out service to the Houston area last week. That move had been planned for this summer, but customers in the storm-prone metropolis were calling and emailing to sign up, and a cold snap was bearing down on Texas, testing the grid’s ability to keep pace with winter energy needs.
“We saw what happened in Winter Storm Uri, four years ago, and we want to put a solution in the hands of Texans for situations like that,” Dell said, referring to the widespread grid outages that contributed to hundreds of deaths. “As another cold front sweeps through Texas this week, we felt like pulling up the Houston launch as quickly as possible was the right thing to do.”
If a homeowner in Texas wants backup power, they could buy solar and a battery. But most battery products aren’t large enough to meet the needs of the typical American home — that’s why you see three Tesla Powerwalls lined up in some garages. At that point, the out-of-pocket cost reaches tens of thousands of dollars, unless the buyer grapples with the current state of interest rates and takes out a loan.
Base Power pitches the benefits of whole-home backup power without the massive up-front expenditure. The company designed its own battery for the express purpose of backup power, so each unit packs 25 kilowatt-hours of storage instead of the usual 10 or 15. It can instantly discharge 11.4 kilowatts of power. Some people get two of these side by side for a truly hefty home energy arsenal.
But the customers don’t buy this product: They pay a $495 installation fee and an ongoing monthly fee of $16. They also choose Base Power as their electricity retailer — Texas allows customers to pick who they buy from — and pay 8.5 cents per kilowatt-hour for their general household consumption.
If there’s no such thing as a free lunch, nor is there nearly free backup power. Base Power (and, by extension, its venture backers) fronts this rather hefty bill, on the premise that it can make money not just from customer subscriptions but by bidding the decentralized battery fleet into the ERCOT energy markets. That also lets Base Power charge a lower rate for household electricity than it otherwise would need to.
“We’re a battery developer; we’re an asset owner,” Dell explained. “For us and for the customer, a bigger battery is better.”
In that sense, this company is the newest in a lineage of startups seeking to unlock the multi-layered benefits of distributed energy devices, which both help a local customer and, when harnessed with effective software and amenable market rules, make the overall grid more clean and efficient.
Many startups have gone bankrupt chasing this rosy vision. Base Power aims to avoid their fate by adopting a very old technique in the utility sector: vertical integration.
In order to make its customer-friendly product into a viable business, Dell and company have taken control of every step of their value chain, rather than outsourcing or partnering.
The company designed its own battery hardware, giving it far more capacity than the market-leading home battery systems. Base Power wrote its own software to govern the batteries and operate them as a decentralized fleet bidding into the wholesale markets. And the startup does its own sales, installations, and long-term maintenance.
The corporate strategy, Dell explained, is to create “compounding cost advantage through vertical integration.” If Base Power bought, say, Tesla Powerwalls and resold them to customers, it would have to give Tesla a margin. If it paid outside firms to knock on doors and pitch batteries, those commercial evangelists would also take their cut. Contracting out for installation further dilutes the profits, and so on.
“Because we do all these things, we can take cost out of every part of the system and then pass those savings down to the customer in the form of low prices,” Dell said. “As our returns go up and our cost of capital goes down, our intention is to build the largest and most capital-efficient portfolio of batteries in the country.”
Minimizing cost and reliance on outside parties makes fundamental sense, and yet fledgling startups typically shy away from taking on so much for fear of biting off more than they can chew.
“It’s really hard,” Dell admitted. However, “because it’s so hard, there’s not a lot of people who can do it.”
It’s a business strategy that calls to mind the ancient bristlecone pines that occupy a remote, arid mountaintop between the eastern Sierras and California’s border with Nevada. The trees suffer extremes of heat and cold and thirst and wind, but when they persist, they carve out a niche where few competitors can survive. The oldest bristlecones predate the pyramids of Giza.
The do-it-all approach also distinguishes Base Power from others that are similarly trying to get more batteries into people’s homes.
German company sonnen has been working on this challenge for over a decade and operates a vast network of home batteries in Germany that make money in power markets there. In the U.S., the company partners with solar companies and sometimes with real estate developers to sell its batteries. Sonnen launched a no-money-down battery offering in Texas with a company called Solrite, which had put equipment in more than 1,000 homes as of January, a similar volume to what Base Power has installed.
Neither sonnen nor Solrite are retail electricity providers in Texas, though, so they need to pair up with companies that buy and sell power and can monetize the batteries’ ability to arbitrage. The Solrite deal requires people to sign up for 25 years and buy out any remaining value if they want to quit before the quarter-century mark. Base Power, in contrast, asks customers to commit to a three-year retail contract, and the cancellation fee is $500, to cover removing the battery system.
Other climatetech-savvy retailers offer special deals for people who buy their own batteries. Great Britain’s Octopus Energy has entered the ERCOT market and offers modest monthly credits per kilowatt-hour of storage capacity if residents let the company manage their home batteries. Octopus uses its software to shift consumption to times with abundant renewable generation, thereby lowering the cost of serving those households.
Startup David Energy offers retail plans in which the company optimizes customers’ battery usage to minimize their overall electricity bill. Tesla itself opened a Texas electricity retailer subsidiary that pays customers a fixed credit of $400 per year for each Powerwall pack that they allow to discharge to the grid, up to three Powerwalls.
Those providers still need customers to front the money or take out a loan to install their own batteries, which constrains how quickly battery adoption can grow. On the other hand, that model means those companies can focus on honing their energy software and trading strategy and don’t have to spend millions of dollars to install and own batteries that might one day pay for themselves.
Base Power pays for its buildout with a mix of equity, debt, and tax credits, Dell noted. Investors funded an $8 million seed raise led by Thrive Capital and a $60 million Series A led by Valor Equity Partners. As for making money, Base Power uses the batteries to arbitrage energy in the ERCOT market from the renewables-filled times of plenty to the valuable hours of scarce supply. The company is currently undergoing qualification to bid ancillary services, a more complex suite of market offerings that maintain the quality and reliability of the grid.
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