Zach Dell

That's $1,600 of margin on $6,500 of upfront cost net of the ITC.

That's on the order of like a four-ish year payback on an unlevered basis with generation one.

Our strategy as a company is to drop our cost structure over time with successive hardware generations.

So with Gen 2, we'll bring more of the design in-house, more of the manufacturing in-house.

We'll have better control over the supply chain.

And our costs will go from roughly $10,000 to get a battery in the ground to close to $8,000 to get a battery in the ground.

That takes the paybacks from four years to three years.

I'm using high-level numbers, obviously, so people can check my math.

With Gen 3...

We potentially will build our own factory and manufacture these things entirely ourselves.

And we'll take that, what was $10,000, Gen 2 to $8,000, Gen 3 to $6,000.

And now the payback looks like a two, two and a half year payback on an unlevered basis.

When you introduce leverage, the returns start to get extremely attractive.

For what it's worth, these are on the order of 10 to 15 year useful life assets, depending on how many times you cycle them.

A four, three, two year unlevered payback on a 10, 15 year useful life is a really attractive unlevered IRR.

Batteries are quite bankable.

Now, merchant batteries are less bankable than batteries that have a contractual offtake agreement.

So what merchant means is you're participating in this energy arbitrage where in one year, like 2023, you could make $100 a kilowatt hour.

And another year, like 2024, you can make $20 a kilowatt hour.

And there's inherent risk in that volatility.