This Week in Startups - Insane Demands of AI & Datacenters: Exowatt’s Mission for Affordable, Sustainable Power| E2039

Episode Date: November 5, 2024

This Week in Startups is brought to you by:NetSuite. The number one cloud financial system, bringing accounting, financial management, inventory, and HR, into one platform. Giving you one source of truth. Download the CFO's Guide to AI and Machine Learning for free at https://www.netsuite.com/twistGusto. Gusto is easy online payroll, benefits, and HR built for modern small businesses. Get three months free when you run your first payroll at https://www.gusto.com/twist*Gusto pricing shown in ad is based on pricing prior to March 2025Washington Post. Stay informed with trusted journalism from The Washington Post. Right now, TWiST listeners can subscribe for just 50 cents per week for your first year at https://www.washingtonpost.com/twist*Todays show:In this episode, host Alex sits down with Exowatt’s Hannan Parvizian to explore how the company is addressing the massive energy demands of AI and datacenters. They discuss Exowatt's mission to deliver affordable, sustainable power solutions that meet the needs of a rapidly expanding tech landscape. Together, they dive into the challenges and innovations shaping the future of clean energy for data-heavy applications.*Timestamps:(0:00) AI search energy consumption and corporate willingness to pay for AI(1:30) Introduction to power, electricity, and Hannan Parvizian of ExoWatt(4:21) Renewable energy, fossil fuels, and data center energy consumption(7:15) AI race, energy demands, and founding of ExoWatt(8:25) Key challenges in the renewable energy sector(9:24) NetSuite - Download the CFO's Guide to AI and Machine Learning for free at https://www.netsuite.com/twist(12:23) Cost of electricity, energy bills, and Texas energy market(13:40) Exowatt’s unique technology and competitive edge(17:46) Introduction to ExoWatt's P3 product(21:34) Gusto - Get three months free when you run your first payroll at https://gusto.com/twist(22:39) Energy storage technologies and comparison(30:47) Washington Post - TWiST listeners can subscribe for just 50 cents per week for your first year at https://www.washingtonpost.com/twist(31:58) P3 modules' energy capacity and storage(34:55) Heat-to-electricity conversion mechanism(37:56) ExoWatt's company background, funding, and scaling challenges(43:14) Variable pricing, customer demand, and AI's energy consumption outlook(50:10) American manufacturing dynamism and AI's impact on the job market*Subscribe to the TWiST500 newsletter: https://ticker.thisweekinstartups.comCheck out the TWIST500: https://www.twist500.comSubscribe to This Week in Startups on Apple: https://rb.gy/v19fcp*Check out Exowatt: https://www.exowatt.com/*Follow Hannan:X: https://x.com/hapi31415LinkedIn: https://www.linkedin.com/in/hannanparvizian/*Follow Alex:X: https://x.com/alexLinkedIn: ⁠https://www.linkedin.com/in/alexwilhelm*Thank you to our partners:(9:24) NetSuite - Download the CFO's Guide to AI and Machine Learning for free at https://www.netsuite.com/twist(21:34) Gusto - Get three months free when you run your first payroll at https://gusto.com/twist*Gusto pricing shown in ad is based on pricing prior to March 2025(30:47) Washington Post - TWiST listeners can subscribe for just 50 cents per week for your first year at https://www.washingtonpost.com/twist*Great TWIST interviews: Will Guidara,Eoghan McCabe, Steve Huffman, Brian Chesky, Bob Moesta,Aaron Levie, Sophia Amoruso, Reid Hoffman, Frank Slootman, Billy McFarland*Check out Jason’s suite of newsletters: https://substack.com/@calacanis*Follow TWiST:Twitter: https://twitter.com/TWiStartupsYouTube: https://www.youtube.com/thisweekinInstagram: https://www.instagram.com/thisweekinstartupsTikTok: https://www.tiktok.com/@thisweekinstartupsSubstack: https://twistartups.substack.com*Subscribe to the Founder University Podcast: https://www.youtube.com/@founderuniversity1916

Your typical AI search, right, whether using chat GPT or Google or whatever, is using 10 to 25 times more energy than the search that you were running just a year ago using Google. So this is super energy hungry. And if you want to have 100 million users using your AI search or a billion, you have to now somehow make for 10 times more energy or 25 times more energy. Yeah. So it's insane energy demand and energy growth. I don't think anyone's actually fully fast.

happening the extent of it. It's crazy to me that modern carcinonious corporations who have been trimming headcount, cutting back on this software spent, are willing to pay 5x. The race to win AI knows no cost boundaries. That's absolutely insane. This Weekend Startups is brought to you by NetSuite. The number one cloud financial system bringing accounting, financial management, inventory, and HR into one platform, giving you one source of truth.

Download the CFO's guide to AI and machine learning for free at netsuite.com slash twist. Gusto. Gusto is easy online payroll, benefits, and HR built for modern small businesses. Get three months free when you run your first payroll at gusto.com slash twist. And Washington Post. Stay informed with trusted journalism from the Washington Post. Right now, Twist listeners can subscribe for just 50 cents per week for your first year at Washington Post.

com slash twist. Welcome back to this week in startups. My name is Alex, and today we are talking about power. And no, I don't mean influence. I mean electricity, but more than that, we're also going to talk about heat. We are in the early days of what could be an enormous power crunch, not only here in the U.S., but globally as well. What's going on?

Well, a couple questions for you. Where is Europe going to get the juice for what Goldman thinks could be a 40 to 50% gain in power demand by 2003? and if data centers could boost power demand by 20% here in the U.S., where is that energy going to come from? Well, we are building bigger, more powerful, and just more data centers today, and that is driving this power demand, so we're going to have to think equally hard about building a better power generation system and grid. And to help me understand a little bit more about what we need and how we're going to solve those gaps is Hanan Parvizian. He is the co-founder and CEO over at ExoWat.

Hanan, thank you so much for being on the show today. Thanks for having me, Alex. I'm excited to be here. I'm excited to have you on. I have been talking about your company more than I think I should because I love the solution that you guys are putting you forward. That's going to help hopefully plug some of the gaps that I just mentioned in the both domestic and global power systems.

But I want to start with kind of telling people why we care if that makes sense, because I think it's fine to throw some stats of people and tell them, oh my gosh, this is a big issue. But I want to put it into chart form. So here we have a chart that just shows the U.S. net on grid demand forecast through 2035. And this is from S&P Global, so this is not my data, this is theirs. But Hanan, this chart shows a plateau, if you will, that in the U.S. are power demands flattened out from roughly 2005 through 2020, and then things

changed, and now we are forecasting quite a lot of new demand. Looking at this chart, do you think these forecasts are, I don't know, reasonable? Yeah, no, well, actually, I think they didn't might be underestimating it in many ways. Just given the recent AI boom and the amount of energy and power that's needed to power the data centers for AI, I think everyone in the industry and also at the federal and state level is concerned about the amount of energy needed to power these energy-hungry, energy-intensive data centers, which ultimately are to the benefit of all consumers using AI

products. Yeah, I'm just kind of blown away by how stable things were. And, you know, for a long time, when I thought about the question of power generation, it was always how quickly can we swap out coal-fired power plants or natural gas generation facilities for solar or hydro. But now we have to actually add quite a lot. And just from a very high level, that really does change the calculus of our power investments. Yeah? Yeah, absolutely. It's exactly like what he said. Renewables were thought of as being maybe a substitute to fossil fuel power generation systems, now it's, it's no longer a substitution. It's a transition into a mix that it has to include both. And even that's not enough. So we have to find more sources of generation.

Yeah, there's a company at a Germany called Kitecraft that's doing flying turbines. And I'm like, okay, good. Now we are really trying everything at once to plug these gaps. But you made a good point about data centers. Let's bring up a chart that we have from Goldman that shows a global data center electricity consumption over time. And also it shows just how quickly this is going up. So if you don't think that we're talking about something very serious that will impact all major economies, look at this. And you can see an explosion in demand in terms of terawatt hours to power data centers in the future. And I mean, Hanan, I'm not going to lie. I think again here, we're looking at a chart that is a little bit conservative. Absolutely.

Yeah. I mean, I don't think most people still appreciate how energy hunting. hungry data centers are. An average data center, that's about 100 megawatt data center, which isn't like a super big one. Yeah. And as we're having conversations with folks, they want to build even bigger ones like gigawatt size data centers. A hundred megawatt

data center consumes the equivalent of 80 to 100,000 households worth of energy. 80 to 100,000 households. And that's 100 megawatts. Yeah. And that's one data center. And it's taking

the footprint of maybe only a couple of households. So, like, you can imagine how energy-dense this is and how energy-intensive is going to be. And, you know, when I go to some conferences, people talk about how much more energy-dense these data-center racks are going to become. Yeah. It is quite scary how much energy is going to be consumed by one GPU unit. And that's kind of a feature that they're trying to build towards is to make them even more energy-dense. so that hopefully that same data center that was once 100 megawatts

could now output 500 megawatts from a energy perspective or conceive 500 megawatts from energy perspective. So I do think we're underestimating it, and we just have to prepare to bring on a lot more generation to the grid if we want to be able to power these data centers. You know, I thought I had gone through every single chart, statistic data point on this topic, and I couldn't be surprised anymore.

But if a 100 megawatt data center is, 82, 100,000 households, and we're talking about gigawatt, which would be 10, 100-watt megabodd-centers together. That is more households than there are in my state. I live in Rhode Island, which is a small state, to be clear. But, like, that's bonkers. And we're not talking about one gigawatt data center. We're talking about a series of them, not only in the U.S., but around, I mean, frankly,

I'm thinking these are going to be around the world, yeah? Yeah. No, I mean, everywhere. I mean, the big tech companies, each one of them are announcing ambitions for, like, 100 gigawatt size data center campuses. And in the AI race, everyone is willing to spend anything to win that race. There's absolutely no, we're not seeing any signs of people being conservative about this because they know whoever wins the AI race is the winner take all winner and they're willing

to compete at any level. Yeah. Okay. This brings me to the kind of the foundation story at XOWAT because you guys started this company. I think it was in 2023. So it's a pretty recent startup. I have a couple of ideas that might have been the genesis point for the business,

but what was the problem you guys saw that you wanted to go out there and plug immediately? Yeah, great question. So Ex-O-Wat started at a venture studio called Atomic, where Jack, who was also co-founder of Ex-O-Wat and CEO of Atomic, and their partners had this thesis around AI and the AI boom that we were seeing, and the thesis was that there are the second order effects of AI

which are not necessarily the application layer which is dominated by all these big tech companies but rather the picks and shovels layer, the infrastructure, the data center, the power, the chips.

And that's where a huge opportunity is going to be and is going to, you know, grow very fast. And then I guess they were ahead of a curve in that sense. And when I partnered with him,

my backgrounds in engineering and energy, we'd really wanted to find a way to power these AI data centers and data centers as a whole with renewable energy because that's not really the way to bring power today. And the key insight that we had was that we have to develop a modular system that we can scale with different projects and different data center size and deploy very quickly so that we can actually get this product to market

and start powering some of these AI data centers, whether it's existing ones or the ones that are being planned to be built using renewal energy. And that was a core idea in Genesis behind X-a-1. What does the future hold for business? Well, if you ask nine experts, you're going to get 10 answers.

Bull market, bear market, rates go up, rates go down. Can someone please invent a crystal ball? And if you're our building one, just email me. I'll fund that startup. But until we get that crystal ball, you need to future-proof your business

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The guide is free to you at netsuite.com slash twist. That's netsweet.com slash twist. The X-O-Lt solution, which we're going to get into a little bit more, but it combines generation and and stored. Was that always the plan at the company? Well, the plan and ultimately our goal was to be able to produce and generate electricity as cheaply as possible for a number of reasons. Number one, we wanted to be able to make the cheapest,

possible electricity so that we can make these AI applications downstream also more feasible for a larger audience. So they're not becoming very expensive to cause of cost of energy because, you know, 60% of the operating expenses of a data center are related to the energy that's used or the power that's used for compute or for cooling. So that's a major cost component. The other reason we wanted to be able to make the electricity as cheap as possible is we didn't want the customers to make a decision between renewable energy or fossil fuels. We wanted them

to make an economic decision for the cheapest energy possible. So it's not that they're going to go out there to pay a renewable energy premium, but rather this is the cheapest energy possible period. Like, that's it. That's the only reason you're choosing it, not because you want to even save the planet, because this is the most economic sound thing to do. So we really started with that goal in mind and set a very aggressive, ambitious goal for ourselves to ultimately at scale be able to produce electricity at one cent per kilowatt hour and kind of worked our way backwards from that. And actually, the solution really developed and evolved around that. It wasn't really we had a specific idea around the way to capture energy or store energy or convert the energy to

electricity, but rather it was really about how do I get to that one cent per kilowatt hour ultimately at scale and what are the ingredients that get me there. And that's what has led to the XO-L-P-3, the product that we recently launched, which is a combination of many things, which I'm happy to talk to you about in more detail. I want to get some more data on that one cent per kilowatt hour, because I think a lot of folks listen to this, get their power bill in the mail or electronically, and they go, aha, $27 or $113, and they have no idea what goes into it. So can you put that data point into a perspective that folks can kind of, I mean, frankly,

grok? Yeah, absolutely. I mean, retail power, basically what you may be seeing on your electrical bill, depending on where you're at, ranges from anywhere from, you know, the low teens, let's call it 12 to 15 cents a kilowatt hour to the high 30 cents a kilowatt hour range. So that means that, you know, a typical household, if they're consuming like, you know, 800 kilowatt hours of energy, then they're paying 800 times just to make it simple, 20 cents a kilowatt hour. watt hour, that's your energy bill per month. So for context, we're talking about one cent a kilowatt hour. So this is, you know, two orders, magnitude, or an order of magnitude cheaper than that.

Because on the commercial side and in the wholesale markets, the price of energy is cheaper than the retail markets, of course. But it's not that big of a difference. So you're talking about in the wholesale markets or commercial energy, people are paying on average somewhere between 8 to 12 to 15 cents a kilowatt hour, depending on. which state you're in. And in some markets, some energy markets like Texas, which is a free energy market, essentially people are paying for the energy that's available at the cheapest price possible. So the price of energy actually fluctuates quite a bit. It could be as low as few cents

per kilowatt hour and some hours of the day and go up to tens or hundreds of cents a kilowatt hour, even dollars a kilowatt hour at other times, given that it's just a free market. Can I ask you about Ercot, which is the Texas grid? essentially. I am a pretty free market guy. I'm a capitalist, but it doesn't seem that everything with more price volatility gets better. So I'm kind of curious, and I know we're off topic a little bit, but do you think that the Texas model is actually better for delivering low-priced energy? Does it actually work, I guess, is what I'm saying. Yeah, I mean, like everything, it has pros and cons to it. I think the pros are from a purely economic perspective, if there's too much demand,

then you as the consumer sometimes don't actually have to even pay for energy. So Ercott sometimes sees negative dollars, like essentially for cause of electricity. And the con is, yeah, you may at the wintertime in the wintertime have to pay 10 times your average energy bill because there's no demand. I think it's driving a lot of competition, and that's why a lot renewable energy development and energy development in general is in Texas. I think maybe not many people notice. California is not the leader in renewable energy, Texas is. Yeah, no, it's true.

And that's because of this free market approach. But at the same time, you know, as you've seen in the last couple of years, when there's a winter storm that comes for Texas, those consumers do suffer a lot. And I think pros and cons is a great way to think about it. But I do love the idea of an all of the above approach to it. you know, bringing more power generation online. And honestly, hon on, I was going to press you on nuclear energy and the big projects that, you know, the major tech companies have announced, meta ran into problems with its nuclear

power plant plans because of bees, endangered bees, apparently. And then Amazon's deal with a power company ran into an interconnection conflict that FERC got into. Anyways, it seems that the hope that nuclear energy can resolve some of the AI power crunch issues in time might be a little too optimistic. I just wanted to vet that statement against your understanding. Yeah. I think might be a little bit too optimistic as downplaying it quite a bit. I think it's very wishful that nuclear is going to solve the AI power challenges at a

minimum in the next 10 years. More likely we're talking 15 to 20 years. And it's not like that I think, you know, the technology is bad or it's not ready or whatever, just the amount of regulatory challenges, like you mentioned, just a couple, the amount of regulatory challenges, the community acceptance challenges, the technical risks they have to overcome, the technical feasibility, the manufacturing, the supply chain, and the list goes on and on and on. I think the promise of nuclear is amazing. I think the reality of it is far more grim than we would like to accept or believe in. And,

Furthermore, I think the fact that we're going to burn fossil fuels for another 10 years to power these AI data centers just to have nuclear come online. Doesn't seem like a solution, right? Well, I mean, not to find a point on it, Hanan, but you live in Miami, which is not famous for being a remote hilltop city, if you will. And so I think there's a little bit of urgency here. But the thing that nuclear does have going for it that renewables traditionally haven't is consistency. It has a high base load. And that matters quite a lot, but it does seem this can be

a long time to come on. And I do think that storage is now being better coupled to renewable. So it seems to be resolving the base load question a little bit. And I do want to kind of move now into the P3. So yeah, let's talk about what you guys have built.

I'm going to try to explain it to you and then you correct me. Okay? Sure. Yeah. Okay. It is a device that fits into a 40-foot shipping container. It is a series of batteries

that store heat. And on top of it, there are a series of solar lenses that take the Sun's energy and convert it into stored heat for both electricity and industrial needs. Yeah, absolutely.

So the way I would rephrase that is it's a modular system and you have the picture up here. So basically what your audience is looking at or hearing about is it's a modular system. Each module is roughly the size of a 40-foot shipping container.

So about 40 feet long, 8 feet wide, 8 feet tall and is made of free elements. That's why we call it the X-O-WP-3. So the first element is the Renewable Energy Collection System, which is powered by the sun. So this is a series of custom-developed lenses that capture energy from the sun throughout the day

and convert this to high-temperature heat. This heat is then stored in the battery, as we said. So we've developed a custom heat battery cell that can store this energy with minimal losses and the way the battery works, and to get into the little bit of the details of batteries, it's a sensible heat battery. So what that means is it is a solid block that doesn't go for any sort of chemical or electrical chemical reactions, doesn't have any mechanical parts to it, and doesn't go for any phase changes.

So it doesn't go from solid to liquid or liquid to gas. It just stays solid. And this solid block gets very hot, so up to 1,000 degrees Celsius or about 2,000. 400 degrees Fahrenheit, and it retains this energy for as long as we need it. The main advantage of this heat battery as compared to your traditional electrochemical batteries, like lithium ion batteries or other types of electrochemical batteries, is that the cost of storage is significantly lower than electricity. So you can store energy for longer with no degradation and for much

cheaper, which allows you to then store energy for longer periods, which makes it useful for an application that requires dispatch for 12, 16, 18, 24 hours a day. And that's what really helps us then serve a data center type load, which is looking for a longer term dispatch throughout the day with renewable energy that's stored very cheaply. And if we were to do this with traditional solar panels, like solar PV panels and lithium ion batteries, that again, unfortunately, would become cost prohibitive because the cost of storing electricity is very high. The efficiency losses of converting solar to electricity are high, and a combination of that would not allow us to really provide a dispatchable power solution for up to 24 hours of dispatch

per day. Anything like the cost that you were shooting for. Exactly, yeah. And yeah, you would never at any scale get to that one cent per kilowatt hour. Just by the fact that electrical batteries, and maybe some of your audience can relate to this, whether it's your phone or any of your other electronic devices, the batteries as time goes by become less and less efficient.

They degrade. And you're not really cycling them as much necessarily per day when they're used that as a source of power generation and power storage. You're cycling them quite not a lot. And so that means they're going to degrade faster. So not only is your starting cost high, but also your replacement cost is high because you have to continuously replace these batteries

with more fresh batteries because they're losing their efficiency over time. The heat batteries don't have that. You didn't start a company to run payroll, did you? Of course not. And that's okay, because Gusto is here to help. Gusto will help you run payroll and to handle your benefits onboarding in HR

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slash twist. That's gusto.com slash twist. I am familiar with the drawbacks of lithium ion. I mean, I've also tracking startups that are working on sodium ion batteries and startups that are doing pressurized gas to store energy and moving water around to you do gravity batteries. I love all of it. But, and I say this with nothing but respect, it sounds like you've discovered something that's magical because if it, if your substance that you're heating up with your solar lenses doesn't degrade, doesn't go through phase changes, can store energy in the form of heat for a long period of time, I got to ask, man, what's the catch? Is there a slow draw

from it? Like, something has to be, you have to give something. Yeah, no, I mean, the category of sensible heat batteries isn't necessarily like a new innovation, right? People are using sensible heat batteries and other applications. You know, some companies and some startups take electricity from the grid, put it in a sensible heat battery, and then dispatch the heat to support an industrial heat load. Yeah. I think what's unique and innovative about what we've done is to be able to design this battery material, both from a material perspective, geometry and the heat exchangers. to be able to capture energy from the sun directly and then store that energy effectively throughout the course of a day or multiple days and then dispatch it to an engine that can convert that to electricity. So there's a lot of innovation that has happened

for that chain and including the material, but heat batteries, I think the technology and the physics of it aren't new, but certainly magical. And I think that I'll give you a simple example. Sure. So imagine your camping and you go out there and you want to make some stakes. The best thing you could do is to find a big rock and put that rock outside directly under the sun throughout the day.

And that rock is going to get very hot by the end of the day. And you can put your stakes on it and basically make your stakes using that hot rock. And now imagine you take that one stuff. It's the famous hot rock method of cooking. Everyone used to do this back in the day. Before we had indoor ovens, ladies and gentlemen, we had rocks. Exactly. And it worked.

And you can take this one step further is imagine you have a tiny magnifying glass in your pocket and throughout the day you just heat up the rock with the magnifying glass so your rock is going to become even hotter. So if we were to dumb down the X-W technology it is pretty much that.

You're taking a rock material and you're heating it up with a magnifying glass with the sun throughout the day and the rock is staying hot throughout the night. And that's basically it. So we've probably invented this technology at dawn of civilization. We're just coming back to it. No, no, I don't mean that is a bad thing.

I think it is kind of a good thing. But one thing that my old coworker, Tim Deschant, who covers kind of green tech in general, taught me is that batteries have tradeoffs. And so is it harder to, for example, take heat out? Does these batteries have a slow energy disbursement? Or is there any disadvantage to the heat battery you guys have developed that I should be aware of? No, I think the main way to, think about batteries is two metrics. Number one is the energy density. So how many what hours per

kilogram you're getting? So for example, you know, the best lithium ion batteries like Tesla backs, they're storing somewhere between 300 to 400 watt hours per kilogram, right? Versus a heat battery, depending on the material, will be storing somewhere between 50 to 100 watt hours per kilogram. So it's less efficient in weight terms. Yeah, so that means you need more material for the same amount of energy. So that's one thing. But the kind of other metric that's to the benefit of heat batteries is your lithium ion battery costs maybe like $245 to $300 per watt hour versus your heat battery costs somewhere between $1 to $10 per watt hour. So that's kind of where the difference comes from.

Those are the tradeoffs. So at the end of the day, and some customers always say, oh, this is not as energy densest as lithium ion batteries or electrical batteries. True, but it's 200 times cheaper. So, you know, that's the trade-off. Also, I'm not putting it in my car. This is why I'm so excited by it. Like, I'm not putting it in my phone. I don't need to move it.

In all the pictures we've shown every technology, I haven't seen a single wheel. It sits on the ground. I don't care how much it weighs. The load carrying capacity of the planet for weight is very high. So that makes a lot of sense to me. But I want to go up a layer to the solar lenses, because everyone's familiar with solar panels.

We've seen them all over the place. People might even have them on their backyard on the roof. Solar lenses, to me, are just very large, specialized, I presume, very fancy, magnifying glass. As back to your point about the rock and the magnifying glass, how can you get so much power out of them? Because if I look at the images of the P3, it's kind of like one row, and I'm used to seeing fields of solar panels. So talk to me a little about the lens effect. Yeah, no, good question. I mean, so at the end of the day, and a lot of people, when they see our system, they think the top layer is at like the solar panel.

But you're right, it's not a solar panel, it's a lens. All that the lens is doing is it's a large magnifying glass, if you will, that's flattened. And so this type of lens is called a frenel lens. So essentially it's just... Yeah, it's like a flat lens that has grooves on one side and is smooth on the other side. And those grooves kind of just represent the curvature of a non-flat lens. With our system, you basically have per module a number of lenses that are just enough, collecting enough energy

for out of the day to charge up a battery pack. So then you take a number of these modules and combine them together including the battery packs and connect them

similar to how you would with solar panels to ultimately deliver whatever amount of energy it is that you're looking for whatever amount of power it is that you're looking for. So it's not like that

one of these modules per se or one of these lens tables per se is going to power a data center. No, no. You still need thousands or tens of thousands of them but each one of these is enough to power a module that can run a heat engine for up to 24 hours a day.

And that's impressive because we started off talking about how the P3 is, you know, 40 feet long, 80 feet wide, 8 feet tall. It's impressive that you can do so much collection with one row of lenses. So I just, I presume from a very physics 101 perspective, that a lens allows for more efficient collection of solar. energy? Yeah. So if you think about it from an efficiency perspective, your typical solar PV panel is converting the incoming solar energy at an efficiency of roughly 20% to electricity.

The lenses, depending on which location you're at in the country and in the world, throughout the day and throughout the year, can capture or collect up to 80% of the incoming energy. That's a lot. efficiency perspective is much, much higher. And just to give you a sense of the power of each individual lens, you know, as we discuss, I'm in Miami. Miami is a sunny place, but it's not really as sunny as other places in the country where they receive a lot of direct sun.

For example, imagine, you know, California, East California, Mojave Desert, Nevada, Arizona, Texas, they receive a lot of direct sun. But even in Miami, even in non-summer months, we get up to temperature. north of 1,400 degrees Celsius, or about 2,800 degrees Fahrenheit on a single lens, just one lens. So, yeah, the lenses are very powerful in that sense. And at the end of the day, the beauty of the lenses is two things. Number one, you get to put all the heavy stuff behind the lens on the ground. So like, as you were saying, we don't have to build structures to suspend anything or put it in the air. Everything heavy is on the ground. And number two,

These lenses are relatively cheap, and that's why we chose, ultimately to our goal of getting to one cent per kilowatt hour, we need to make the lenses as cheap as possible, and that's why we've designed a system around these lenses as well. If you listen to this podcast, you obviously care about what's going on in the world, and you're going to want to get great coverage, which means you need to subscribe to the Washington Post. I know the election is now behind us,

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slash twist to subscribe for just 50 cents per week for your first year. What a deal. That's 80% off their typical offer. So this is truly a steal. Once again, Washington Post.com slash twist to subscribe for just 50 cents per week for your first year. I mean, it's like the cost of a cup of coffee every three or four months. What a great deal. Get in there. Washington Post.com slash twist. Okay. So now, each P3, what are the stats for how much? How much? energy it can store and then disbursed over, I was going to say a 24-hour period, but that might not be the right metric. So what's the right way to think about the energy capacity of each P3 module? Yeah, so each P3 module can have a number of battery packs in it,

and that kind of drives the energy capacity. So a standard one that is completely deployed, off-grid, and charged only using the sun will have two battery packs in it. And that produces 25 kilowatt hours of energy, electricity. And the reason I say electricity is because this is a heat battery, there's another capacity to it, which is the thermal capacity. And that number varies because it really is a function of the temperature that you're taking out of the battery or charging it at. So I wanted to do a quick digression on heat because I am not a machinist. I've done a lot of machining. I'm not a welder. I've done some welding. I've been around industrial facilities. I have some idea of why heat matters. Can you tell people why in an industrial setting heat is almost as valuable. a commodity as the electricity? Yeah, I think before the digital age, pretty much everything was driven by heat. I mean, civilization started with heat. When we invented fire and then we kind of became humans, civilized humans, that was step one.

Everything you see in industry, whether it's in the manufacturing industry, the steel industry, chemicals, food and beverage, a cement, everything uses heat as an input. And this is heat at different qualities and different grades. So it's at low temperature heat just to boil water and use it for water purification and desalination at maybe 100 degrees Celsius, all the way up to 1,500 degrees Celsius, 1,800 Celsius that's used in cement plants or in the steel industry. And even in those industries where they're taking electricity from the grid, what they're doing is they're converting electricity back to heat. So this all comes back to heat. And so that's why heat is so important. And that's why, by the way, there are a lot of startups and companies focused on the heat application alone,

because decarbonizing industrial heat by itself is a $60 billion in industry, and there's so much that you can do there. The reason we don't sell heat, or we're not focused on the heat application as much, is because the problem that we're trying to solve for is electricity for powering data centers. So unfortunately, they don't take heat as an input unless someone invents a chip that runs on heat. but um i don't know give jensen a couple of months so you can fly come up with something yeah i mean i i wouldn't rule it out it's it's possible i wouldn't rule it out and by the way it will be better actually if the chips ran on heat it'd be more efficient for you guys because then

you can just pipe in heat directly and not even need to go through what is the mechanism by which you guys convert heat to electricity is it a heat exchanger a sterling engine are you guys spinning up a turban what do you do yeah good question so when we were trying to find the right heat engine for ourselves. The number one factors for us were that it has to be a modular system that has a supply chain that we can build around and scale into. And so we studied a lot of different heat engines, like the turbines and every single cycle of a turbine, if your audience is familiar with like a Brayton, a Rankine, a critical CO2 cycle, and all the way down to the other end of the spectrum, like more fancy semiconductor-based heat exchangers like thermal photo

of Voltaic systems or Tegs. And we kind of chose a sterling engine as our primary heat engine because it's the simplest heat engine in many ways. It's very reliable. There's a supply chain available for it. And most importantly, the maintenance kind of items for it are much more limited than a turbine would be.

And you don't have to operate it at 2,000 degrees Celsius for it to run, unlike a TPVC. cell, for example. So I made a sterling engine in my junior high school physics class. So it's been, not to date myself, but it's been a minute. If memory serves, sterling engines depend on a heat differential. And then they use that to oscillate a cylinder type thing back and forth. Is that, is that right? I have like a toy sterling engine here in my hand. The 1800s, everyone has arrived. Yeah, exactly. I mean, the way it works is you can even put this under your coffee mug and it will start running, right?

This is something you can buy off Amazon if anyone's interested. Oh, and just to sports cast this, everybody, it's a bronze wheel attached to two discs and essentially if you put heat on the bottom, the wheel will spin. Exactly, yeah. So the differential between the hot end and the cool end is what allows this gas that's inside to expand and then that starts spinning the wheel and then it will continuously spin. And this is the simplest form of a stirring engine. ours is a little bit more complicated than that.

But yes, that's kind of how it works. You have a hot end and you have a cool end and the delta between the two as creating that differential that spins the engine. I can't tell if we're dumbing this down too much or we're really just getting back to like basic principles, but between hot rocks and really old sterling and news,

it feels kind of like we're using very elemental tech to power the absolute cutting edge of digital tech. And I find that poetic is too strong, but nice in a way. Like, it feels, it fits to me, if that makes sense, Hanan. Yeah, absolutely. I mean, and this is a saying we have at the company is we truly believe we have the benefit of hundreds of years and centuries of technology development. And we're standing on the shoulders of giants here because a lot of this technology

has been developed before, has been used in other applications. And what we're trying to do is, of course, innovate around it and make it more useful the power, like, as you said, the cutting edge of technology, which is AI today. So let's talk about the company a little bit. I know you guys raised a $20 million round, uh, April, 2004, Andrews and Horowitz, Sam Altman, Atomic, Felices. So kind of a murderer's row of people who are putting a lot of money into AI makes sense they're backing your company. I'm curious about how far that money has taken you guys and how close are you to shipping P3s and, you know, firing them up equivalent. And, uh,

plugging into customers? No, first of all, we're super lucky to have the support of this amazing group of investors that you said on this journey. And what we've done with this capital is now launched the X-O-LP to the public. So we had a public launch over a month ago in Anaheim. And since then, we've actually super overwhelmed with the amount of interest that we've seen for the product. so we have received orders for the next 3 million units. So we have to build. Whoa, whoa, stop, stop, stop.

So many things are coming up at once here. Tell me how much interest were you expecting when you announced the P3? Yeah. When we launched it, we thought it was going to take us a couple of years to get to maybe a gigawatt worth of demand. And in a month and a half, we quintupled that. So you have five gigawatts of demand, which is 3 million units. Yeah, exactly. And so for us, it's not even measured in gigawatts because it's measured in terms of energy. So it's about 85 gigawatt hours that we have to deliver against.

You reminded me of the game, Oxygen Not Included, in which I had to learn all about power grid, storage, watt hours, and so forth. And then I forgot immediately when I stopped playing. But that tickles my brain. Yeah, yeah. So clearly, demands off the charts. Have all the, has the interest for P3 systems come from the people you've, expected, i.e. data centers, or has there been another, like, demand source that is surprised X-O-O-Wat? No, no, I mean, 90% of this is data centers. And I haven't even talked about the ones that are in the process in the pipeline. So we expect that to double. So we're seeing more demand than we had envisioned or even hoped for, and even in our wildest streams. So the plan right now is we are executing against purchase orders from our early customers, and we're going to

going to be deploying these units in the field in places like Florida and Texas in the coming months. Coming months. Is that this year or is that like Q1-25? Hopefully by the end of this year we'll have some units, but really like operational by Q1-25 is where we're trending towards. Okay. And how much would a P3 cost me? If I rocked up to the X of what headquarters with my debit card, how light will my wallet get for getting just one? Good question. Yeah. So we basically launched it to the public for $7,500 per 25 kilowatt hour module. So you could buy one for $7,500. I thought there was going to be another zero on that.

Yeah, I mean, if there was, we would never get to the cost of electricity generation that we expected. No, no, I mean, I guess I should have run the math to get to one simple a couple of a hour and so forth, but that does feel very inexpensive. Is there a lot of gross margin in that for you guys? Yeah, there's a decent amount of gross margin in that. And we also ultimately expect to, you know, bring down the cost of building these even further, not only increasing our gross margin, but also benefiting ultimately the customers with a cheaper source of electricity. So as you have the BOM down, your margins get better. That's great. Makes the business better.

But a question about these, is there any recurring revenue components to this? Because selling 3 million units at 7.5K each, stupendous business hats off, well done, no beef. But I'm curious if there is something that continues a little bit more SaaS-like. We do have software that we've developed that also we charge for in a subscription basis. And the software includes the basically control software for running the modules, running a project, but also a very sophisticated digital twin that allows us to predict the performance of the system and also do predictive and proactive maintenance on the systems. And that's all a testament to the work that our team of PhDs have been doing

on building a very high fidelity model of the system. Do you guys need to raise another $100 million to scale up manufacturing? Because I know you're building these in the states, which, by the way, from a supply chain risk perspective, makes a lot of sense to me. But it just feels like you're going to need to have, I mean, an enormous manufacturing footprint to meet even a fraction of that order book. Yeah, good question. I mean, that's why from a execution perspective, in the early days, we're not doing

vertical integration of manufacturing. We're actually partnering with leading contract manufacturers, which have 500,000 square foot facilities or million square foot facilities and building and ramping up with them because what we're optimizing for is bring this product to market because what we understand from our data center customers is the number one variable for them is time to power. So how fast can you deliver this technology to me is more important and even how much it costs. Yes. And so that's what we're optimizing for, and that's what we're doing with our contract manufacturing network. Do you know what tech companies love to do, Hanan, is what they call variable pricing. And, you know, it sounds like, given the scale of demand that XOW currently has, and the fact

that it's manufacturing is ramping, you guys might be able to add a zero to some of these to let people skip ahead. So I'm curious, is anyone going to pay above list to get module stock? Yeah, it's actually a good point you mentioned. people are actually willing to pay, and we've seen this in our own data set, with our own customers up to 500% premium to get access to behind a meter power or to get access to power in any form for a powering data center. So this is, like as I said at the beginning of the discussion,

the race to win AI knows no cost boundaries. Yeah. Well, five, okay, I know, I know. I know what you're saying is correct, but it's just, it's crazy to me that modern parsimonious corporations who have been trimming headcount cutting back on the software spend are willing to pay 5X for this.

But it also makes sense to me. It's just hard for me to kind of have both in my head at the same time sometimes. That's absolutely insane. And the other thing, just another stat, maybe your audience may notice or may not notice,

your typical AI search, right, whether using chat GPT or Google or whatever, is using 10 to 25 times more energy than the search day you were running just a year ago using Google. So this is super energy hungry. And if you want to have 100 million users

using your AI search or a billion, you have to imagine you have to now somehow make for 10 times more energy or 25 times more energy. So it's insane energy demand and energy growth. I don't think anyone's actually fully favining the extent of it. Well, that's why I asked you up top, do these numbers look conservative? Because to me, I'm looking at a chart,

and it's like, okay, it'll be annual growth of 1.9%. And I'm like, but will, will? it's a little bit like if you've ever seen a chart of people guessing what the economy's going to do and their their guesses are always completely trash yeah because they can't model net new things essentially they can only re-missage what they know yeah so i think we're going to see five six percent annual growth and it's going to yeah change everything no i actually read a reporter a while ago that showed that every single prediction about energy markets historically for the last 50 years has been wrong every one of them well this is why i never believe anything mackenzie put

out and they're like, by 2035, AI searches for your mom will be worth a $5 trillion. I'm like, you don't know anything. You just paid three nodes to sit in a closet for a weekend. People have always underestimated both the growth and also the technology advancements. Today, data centers represent 2% of global emissions. If they grow at the rates that these folks predict, which as we discuss is not necessarily going to be true, it's going to be underestimated. Data centers alone by 2030 will account for 10% of global emissions. And to put that in perspective, you mentioned cement earlier.

And I pulled up the stack because I know that cement is an incredibly pollutive industry. I'd forgotten that cement, just the industry thereof, is between 5 and 8% of global CO2 emissions today. So, you know, this would be essentially up to 2x cement. So we're going to have to have a lot of this stuff out there in the market. Now, I know the demands high. I know people are willing to pay up for it. But how many P3s can you guys actually create and build next year? I don't know if it's 20 or 20,000.

Yeah, it's in between. So we're shooting for a couple of thousand for next year, and then really trying to ramp up the following years to get to a production run rate of about a million in the next couple of years. And once I bring these to my data center, let's say, when you say modular, my mind goes easy to install and setup. So I'm kind of curious from the truck with the flatbed and the P3 arriving to when I actually had this bad boy turned on,

how long does that take? Yeah, I mean, this goes back also to the original hypothesis behind the company as we realize modular systems have the advantage of, number one, because they're modules, you can build them in the factory, you can build millions of them and bring down the cost curve. Number two, the place where a lot of costs overruns happening in energy and infrastructure projects is during the construction. And those are costs that you cannot control as like the OEM. So with our system, this is just a install and forget system. You take it off to the flatbed and you put it down. there's no on-site construction. And then like solar panels, you just connect them electrically together and connect them to the load.

And that's all there is to it. And that's a huge component of the cost that is taken away as well by doing everything at the factory level. Why can't I have one of these for my house? You technically could. I think we are prioritizing, of course, commercial applications to begin with because there's a lot of demand there on that side. and also because customers, consumers essentially might have challenges financing this to begin with. But it's only $7,500. I mean, I'll take $10.

You know, like, I mean, to me, this sounds so cool. Like, I love the idea of going off the grid. I love the idea of having my own power sources. Everything about this sits well with me. So to me, I'm like thinking, just cut it into four bits, give me a quarter, like 10 foot by eight feet. And I'll just put that out at our weekend house and power it off the grid. Yeah, you could. Yeah, I mean, yeah, definitely. If you have a house with a yard or a ranch, you could just put a couple of these on.

You probably don't even need a couple, frankly, need one. And that will hire your entire operation there. Actually, this is a question I meant to ask earlier. How much solar energy do I need from the sky to make this work? Because I know it works in Miami. I'm sure it'll work in Austin, Texas. I'm sure it'll work in East California. But I grew up in Oregon, which used to be a very rainy state with a lot of clouds.

So would a P3 powered setup not have worked there, or even in lower light settings, can it still do a pretty good job? Yeah, so two things. Number one, on Oregon, actually, East Oregon is very sunny, as you probably know. East Oregon is just West Idaho. We don't talk about it. It doesn't adjust. I used to live in East Oregon, so that's what I'm saying. Oh, where in East Oregon?

In Bend, Oregon. Oh, my sister lives there. I grew up in Corvallis. Yeah, great. So East Oregon definitely is how this would work, and they're actually data centers there. And that's number one, but yes, it is correct. Like the more solar resource you have available to you, the better this works and the higher your capacity factor is. So the more you can use the system.

It still works in lower solar areas as well, but you will just be able to use it for fewer and fewer days per year, which means that it's not useful as a round-clock 365 solution. But that makes it in a high sun environment. Like let's just say we're in Phoenix, something like 300 days of sun a year. this effectively becomes the equivalent of baseload power. That's correct, yeah. This is something that you can completely run your application with offline, if you wish so. We don't recommend you completely go off-grid for an application that has a certain level of reliability, backup or redundancy requirements.

But theoretically, yes, it is possible. Okay. I want to wrap with something about American dynamism, because I know you raise money from Andreessen Horowitz, and they're banging the drum of re-industrializing America. which, frankly, as an American citizen, totally here for. By having U.S. best-based manufacturing, to me, you guys are making a statement that it's possible. And so I'm kind of curious, how hard was it to find the right contract manufacturing partners, companies, and so forth, to build P3s domestically? Because a lot of companies would just build them in Mexico or China or, you know, somewhere else.

Yeah, I think for us is very important to build this around the U.S.-based supply chain and U.S. manufacturing. And we made a lot of tradeoffs around the materials to make them sourceable from the U.S. if you will. Not only was that the reason, but many other reasons that led us the selection of the materials. But I think ultimately, I wouldn't say it was the easiest job, because at the end of the day, when you talk to people, even people who want to build in the U.S., they always have China or Mexico in the back of the mind as a next alternative. And we've really, really worked hard to make sure that we can source from the U.S., built in the U.S. And I think it's becoming better, right? As the American Dynamism Fund at Andresen has been kind of pioneering the way on this,

bringing back and onshoreing more manufacturing, at least at the startup scale. And of course, you know, at the federal level in bigger scales, we're seeing more and more opportunities to manufacture with local CMs and local machine shops. We're seeing more and more supply available for different components. People are trying to recycle existing materials to make them more available. and cheaper than what would be the equivalent coming out of China. So I think there's a trend there. We're still quite a ways away from being able to be super cost competitive.

Yeah. But we're getting there. You know, I just realized going back to the AI boom, second order, which is the Pixen Shubbles, the second order, the third order, I guess is going to be the stuff that goes into your proprietary batteries and people who make metal casings to hold stuff. And I presume you guys are not grinding your own solar lenses. There's a company that does that. It's cool to see how deep the effect of having manufacturing back on short is for the broader American industrial footprint.

I hate to say it, but it makes me feel a little bit optimistic. No, you should be optimistic. And I think the other thing is, you know, people are worried about the effect of AI on the job market. What I can say is if you come and join us and helping power AI, there are a lot of jobs that AI cannot do today. and there's going to be a lot of green technology and climate-related jobs that I think the American population will benefit from and the job market will benefit from. And it's a good thing. You're doing something to make sure we don't kill the planet for our kids and grandkids because we're using Chad GPT a couple minutes a day. I forget who did the tweet, but someone was like, great, we're going to boil the earth so that way you can make another derivative image. And I was like, okay, that's not fair, but it's not entirely not wrong, so we have some work to do.

Yeah. Hanan, thank you for coming on the show. I really appreciate it. And when you guys do have the first P3 setup in place turned on, I want pictures, I want video, I want you to come back because I'm so excited to see how quickly you guys can scale this from company in 2023 to unveil a month ago to in the market. It's been quick and all the best. Yeah, thanks so much.

And definitely we'll keep you in the loop. And thanks so much for having us today. My pleasure. Everybody, Twist is here four days a week, Monday, Wednesday, Friday. We do news. We also have awesome founders from around the loop. the world like Hanan himself to come talk about what they're building. We'll see you all soon. My name is Alex. Goodbye.