Zach Dell

The lower the cost that you can generate an electron, the higher your returns as a developer.

And then there's maybe one more component, which is retail electricity.

In the deregulated parts of the market, the transmission distribution utilities who run the poles and the wires are not allowed to own generation and they're not allowed to own retail.

You have pure play generators, wind farms, solar farms, gas plants.

You have pure play retailers, which are really just energy brokers.

They're buying wholesale power and they're marking up and selling it at retail.

And by the way, those businesses are primarily sales and marketing led.

They're kind of like hedging energy trading businesses.

There's no technology or innovation.

They basically have a marketing function, a support function, and a risk management function.

And there's a checkered history of those businesses doing really well, doing really poorly, going out of business when they take too much risk and that kind of thing.

And they're kind of notoriously not very good businesses.

They're 10% to 20% gross margin and not all that profitable, although they can be quite cash generatives just given their low operating burden.

Then you have what are called gen tailors.

People probably know of Vistra and NRG and Constellation and Calpine.

And these are some of the more scaled and publicly known gen tailors.

They own Generation and Retail.

Really what that means is they have a long book and they have a short book.

Because when you sell retail power, you're taking a short position.

You're saying, I will sell you, Patrick, power at 10 cents a kilowatt hour, no matter what.