Zach Dell

Obviously, there's upside, but there's obviously downside.

And so the loan-to-value or the amount of leverage you're able to get on a merchant battery in ERCOT is much lower than the loan-to-value

you're able to get on a contracted battery in ERCOT.

So you see LTVs on contractual battery assets in ERCOT in the 70s and 80s.

Now, Merchant is probably much lower than that, and they're harder precedents to find, but they're going to be on the order of 30%, 40%, 50% loan-to-value.

If you look at our cash flow stream, the biggest chunk of it, that $1,200, that $40 kilowatt hour times 30 kilowatt hours is merchant exposure today.

Now, we're working on different ideas and opportunities to make some of that contractual, and there are interesting financial products you can get involved with that help with that.

But assuming that is merchant, the $200 of retail energy margin and the $200 of customer payments, those are more contractual.

because the customer signs a contract with us, they're with us for the life of the battery, they pay us every month for electricity, and if they wanna keep that battery in their house, they're gonna pay that $17 a month.

And so those look a lot more like contracts than the merchant.

If we can get our loan to value to 50%, those 20 to 30% of levered IRRs obviously go up really significantly.

So we think it's a really attractive financial asset

If you're able to do all of the really hard engineering to drive that upfront cost from 10 to eight to six, and then also the engineering to be able to monetize that asset in the wholesale markets and support the customer and do all those other things.

And then I think there are really interesting adjacencies to go downstream into the home.

Solar is the obvious one.

We can talk about that.

If you've got a battery and inverter on the home, you're selling the homeowner power every month, you've been to their house, you have pictures of their panel and their meter, you're really well set up to go add solar to the equation.

But there are really interesting home energy products that we're excited about.

Smart EV charging, electric water heaters, electric heat pumps, other appliances in the home that can be electrified.

That when you have a battery on the home, which is really like a computer on the circuits,