#112 Lauren Flanagan, Sesame Solar: The fuel convoy is the target

When I first started talking hydrogen to them two years ago, it was like "No, no, no." It's like the Hindenburg fear, right? "We can't handle this. There's no way." Even at a big planning session I was in last fall, there was interest but skepticism. And the difference is now, there's like "We wanna try it. We wanna buy it. We think we need to use it."

Welcome back to The Vertical Space. Today, we're speaking with Lauren Flanagan, CEO of Sesame Solar. Sesame builds mobile nano grids, self-contained units that make their own power from solar batteries and stored hydrogen, and they're now using them to refuel hydrogen drones in the field. The bet underneath the company is that contested logistics have changed the math on energy at the edge, and that making power where you stand beats bringing fuel to it. We get into whether that case holds up, the physics, the market, and the gap between what's proven and what's still in simulation. Here's the conversation with Lauren.

Lauren Flanagan, welcome to The Vertical Space. Great to have you on

Thank you. I'm delighted to be here

is there anything that very few in the industry agree with you on, Lauren?

Well, I think we're gonna see, a advent much sooner than we think of Uber does the Jetsons with, flying, taxis that are land, sea, and air capable, and I think hydrogen will be the perfect fuel for this. So maybe a little sooner timeline than folks might have seen. I mean, certainly we're seeing some hydrogen eVTOLs. We're seeing the beginnings of hydrogen in maritime, got some hydrogen vehicles, but putting them all into one as a shared service. And I think that we're gonna see less, which is, many people do agree with this part, that we'll see less vehicle ownership, but I think these will be shared by communities, and they'll be able to go pretty much anywhere they want, and they'll be running on hydrogen

How do you assess the progress of the segment so far?

Well, you look at, let's start with, cars. So we've got, we've got some hydrogen vehicles which are the performing well, particularly the long-distance trucks. I think the issue for the consumer use is, of course, the fuel, and there's only a couple states that have, California being the main one, that have much of a fuel supply chain, but that can be addressed over time. I think in aviation, we're seeing increasing experiments with, hydrogen-powered, planes of all sizes, and I'm sure we'll talk later about hydrogen-powered drones 'cause we're on, ground central for that. And then in the maritime, we're seeing increasing use of hydrogen. For under sea, it's a little more challenging because having the hydrogen operate underwater under pressure is a little more challenging, but I think that's, something that's coming. So I think we're gonna see these vehicles that can go anywhere, and they're gonna be running on hydrogen as the fuel of the future

Lauren, what would you say... But I gotta admit, you've knocked this first question right out of the park because there's a lot of controversy around every statement you just made, I think.

Exactly. Well, we gotta start with a bang, right?

right. So let me ask you, what's the least controversial part of what you're saying? Where is hydrogen most accepted today, which very few people would argue with, as it relates to transportation, commercial or defense. What, what's least controversial, would you say?

the use for hydrogen for long-haul trucking, I think, is probably the least controversial because it definitely can be justified. You can carry large amounts of fuel. You can have a longer range. it's, it's a very good solution for that. Vehicles where there's a supply chain, it's also a, a, a compelling answer, though, the, how fast that supply chain will get sorted given the policies have changed at the governmental level. And the maritime, we're seeing it in ferries. but to be on unmanned surface vessels, I think that's an easy one that can be added. unmanned underwater vessels, that's a little more challenging, as I mentioned, due to the pressurization, but there's probably ways that can be solved. And then, again, we're seeing in, in aviation, it's really very compelling for certain h- drone applications, and we're seeing some planes also wanna do this, especially with, the fuel disruptions in terms of fossil fuels, JP-8 and others, and, the increasing costs. being able to have a clean-burning hydrogen fuel supply chain could be very compelling as cost, basis changes, which I believe it will radically over the next several years.

Okay. m- more specifically about aviation, and I think we wanna talk a little bit more towards the drone part of, aviation if we could. what, what's the real operational problem you're solving? and for whom?

and maybe before that, just to frame the conversation, tell us a little bit about the thing that you are bringing to market so we're grounded

Sesame Solar product

And so Sesame makes, mobile nano grids that self-generate power for a variety of applications, and we make the power principally from solar, which we store in batteries, and we have backup power in the form of hydrogen, both stored and hydrogen generation. And one of the applications that, we are quite focused on right now, 'cause it has both military and, non-military applications, is the use of hydrogen fuel for, drones. So in the case of, the drones that we're working with, we're working with a company called Heaven Aerotech, but there's others we could work with both smaller and larger. they have long endurance. On a single canister, which holds about 400 grams of hydrogen, they can fly eight to 10 hours at a lower thermal and audio signature, which means they have better survivability, lower detection, and they... That's a long time. But the, the problem that has been hindering adoption for this kind of drone usage in the past, and this would be intelligence, surveillance, and reconnaissance, or ISR, has been how do you get hydrogen to the field? you're just taking a complicated fuel supply chain already with JP8 or diesel or what have you, and now you've gotta get hydrogen there. But what we're doing is actually arriving with stored hydrogen that's safe to transport by land, sea, or air, so we can immediately, fill those canisters and get the hydrogen drones flying, and then we can make additional hydrogen in the field to keep a continuous power loop for extended operations depending on what the mission is and where it's located. So that's the problem we're solving, is how to bring hydrogen at the edge without the transport problems of traditional high-pressure hydrogen, which has got a lot of hazmat. You can't easily take it on, ships and planes and the like. There's a lot of considerations 'cause it's highly volatile So we're solving that supply chain of hydrogen by being able to arrive with it in the field with a very large capacity and to produce additional hydrogen as needed to have a continuous operation. And it doesn't just have to be for drones, it could be for other applications, but that's kind of our go-to-market, design. And then in addition, since it's a command and control station with comms and edge compute, you could have all kinds of battery-powered drones as well. So we kind of envision the ideal solution is you have the hydrogen drone long duration flight, eight to 10 hours per flight, and it's getting the intelligence, and then you can have battery charged drone swarms that can go and do, counter UAS work. And so that's like a teaming approach where all the power is provided in one solution and generated at the edge

Lauren, given, before we get into the drones and, the use of hydrogen, talk a little bit more about what the company's doing today with the military, what's working, uh, very reliably, just to give our audience, a sense of the successes that you've had in the, on the hydrogen side and, and improving the supply, chain in the process

Yeah, so one of the tests that we did that we're very proud of with the Army Corps of Engineers was we had one of our nanogrids, again, solar battery, hydrogen generation, backup power, hydrogen in, from the storage, and we had it for 13 months at White Sands Missile Range in New Mexico desert, wide range of temperatures. And it was powering, AI hardware, software, and a small weather station, and it was unmanned, operating 24/7. We had zero power outages, so this was the continuous energy loop. The only time we shut it down was twice to do some maintenance, literally to blow the sand off the panels 'cause it got a lot of sand there, and two times we reduced the capacity of the solar, 'cause we have deployable solar arrays. We closed the sidewalls 'cause high winds were coming, like 80, 90 mile, mile an hour winds, so we closed those, but it was still operating. It never shut down. So imagine a five kilowatt generator running 24/7 for 13 months to power this that never went down, and there were no people there to fuel it, and no one to have to do any maintenance except two times, and it was minor, minor maintenance So that's one example. We have it out, out in the Marines in, Indo-Pacific, where war fighters are using it as command and control workspace. They can fit about eight of them inside our CONEX, and they... because it's quite humid there, we also have atmospheric water generation. So we make all the power they need, we make all the water they need to drink. They have comms, Starlink or equivalent. They put in their custom comms. They're doing, I don't know what kind of counters UAS type of activities, but as, the officer in charge of this said, "If we had some MREs and a couple of tents, we can operate indefinitely with this solution." And so in both of those, a key part of it isn't just our power, but our materials used, that we can keep it, machine comfortable through very good insulation, air space, and vapor barrier, so that the amount of power to keep it machine comfortable is low. That's c- sometimes called the parasitic load. So that, that you can save your power for the maximum use for these other activities. And, when, in fact, when we shipped it to the, the location, which I can't name, in the Indo-Pacific, it had been on a ship for two months. It had sat in, customs port for about 45 days, the first one. There's several there. And the receiving officer's like, "Oh, this thing's gonna be an oven, but, we better get some fans and everything before we go in." We're like, "No, it should be fine." So we opened it up, and it was like 80 degrees, which is, kind of normal temperature there, but put on the AC, and it was the coolest place on, the, the island where it was located. And so, that material science side of it is quite important, too, that it can be in a wide range of temperatures. We've also done some research projects with the Air Force, where we actually learned a lot about this temperature control, because we actually had some of the components fail at an Air Force base in the High Plains at -40 degrees Fahrenheit. So we're like, "Okay, we gotta fix that." We have to do a better job of insulation and isolating these components so that we can not have this problem if it's cold or if it's hot. So we, and we're currently working with SOCOM for, modernizing, not just us, but a consortium of power generation and storage companies to modernize the core power that rolls off C-17s or C-130s for smaller bases. so we are very actively involved with a number of agencies and discussions with others, but we have solutions that- Open up in, and can generate power in 15 minutes, one person set up. So immediate power generation that's self-contained without any, further installation, and that's a, a very big win. So in the case of WSMER, it was perimeter security, completely unmanned. In the case of the Marines in the Indo-Pacific, these are intelligence workspace units doing all kinds of things that we don't have the... We don't know. We're not told. but are, being used with lots of, war fighters in them. And then in the case of, the SOCOM, if we are selected as part of the program, then this would be, like, the future footprint of what power looks like for these kinds of systems. So we're proving it in the field, working with the design. We're doing a lot of things

so the mobile nanogrids, you've been selling those for a number of years now for all kinds of use cases. The drone refueling nanogrid concept is relatively new. Is that

Yes. we, we started out with emergency response for extreme weather events. Have a lot of cities and counties, a utility, some telco broadband companies, places that have to have the power when the power's off to provide services or to back up cell towers. So we had the experience of doing that for a number of years, and we still sell, of course, to all those who are dual use, companies

But hydrogen is central to all of those

In most cases, if you have lots and lots of sunlight, you don't necessarily need the hydrogen as a backup. It's most valuable in places where, s- either the peak demand is high, which of course is often military, even if it's in a sunny area, or you're in like, say where we are, Michigan or 45th parallel, you only can average about four or five hours of sun, on an annual basis. You might get a lot more in the summer, but in the winter only a couple hours. So being able to have stored hydrogen and hydrogen, as a backup power is a very useful way to extend the duration of the solution that we provide

Demand signal for hydrogen drones

so as it relates to the drone refueling nanogrid, and in particular the hydrogen piece of it, how do you assess the landscape of, in particular, the demand for hydrogen-powered drones, either in defense or, commercial markets? What was the motivation for bringing this to market?

And Luka, can I just add on to it based on something I was gonna ask just before, but Lauren, you can a- answer both. as you answer Luka's question, why not just stick to land-based I mean, you even talked about where is hydrogen best accepted today? It's trucks and it's maritime. Why go to the air where the, you would think the market would be extensive for something that'd be a whole lot easier before going to the air and going to drones? So try to answer those two in one, one response.

Well, the first part of kind of both questions is our sweet spot is mobile power, self-generating power in remote locations or when there's no power or the grid is fragile or in a contested environment. So that- that's where we are, not trying to necessarily replace diesel generators, but we are in there when you don't have it and you need it, and we can make the power without having to have a fuel supply chain. So go- there's plenty of large hydrogen systems that are out there. You can make it from methane or from ammonia or from, a lot of different ways to make hydrogen to set up a fuel supply chain for trucks or vehicles or even maritime because that's all ground-based. But when you're in the island as you've just gotten off a ship or been dropped down by, an airplane and there's nothing, how are you gonna do it? Right now, we're taking lots of JP8 out there, sometimes diesel, or you're in a location like just think about with hurricanes in the southeast where power was out for extended periods. You couldn't even get gas out of the ground. You couldn't even get to a lot of locations. How can you have power when you need it that can be continuous without a fuel supply chain? So that's our sweet spot focus of what we do, and then when you think about those applications, so what do you need power for, right? Well, you need it to charge devices, to keep, the personnel, whether they're emergency workers or, or our troops. They need the power for a base camp, for living, for their missions. But if you think about their missions, I mean, warfare is increasingly becoming robotic, right? We're doing drones everywhere, as we see from Ukraine and the Middle East, and, a very good application would be to use hydrogen drones. So since we had the ability to have this hydrogen, we went looking, like who do we think is the best hydrogen drone manufacturer, and we came upon Heven Aerotech in the US. There's others in other locations. And we said, "Do you want to partner?" And they actually have, some small-scale hydrogen generation that they can do, but not enough to keep these long, duration projects going. So we're like, well, what if you land somewhere, you're there 30 days, it's a typical mission for these smaller, 10 to 50-person operations, and you're gonna be there 30 to 60 days, and you wanna have surveillance and you wanna not have to have another fuel supply chain. Well, we could solve that problem. We could arrive with enough fuel and make more, make additional hydrogen, plus have some comms and other operations, that that would be, a better way to do it because of the, as I mentioned, long duration. That, that Heven Aerotech Z One can fly eight to 10 hours on one canister of hydrogen And does so with a very low thermal and audio signature. and f- can fly low so it's virtually silent. And that's, means it has much lower detection and higher survivability. So you could run, missions once or twice a day for the whole time and be providing surveillance information without having to have a hydrogen supply chain. So he said, "That's something very unique." Of course, we already could power anything battery by swapping it or just charging it or have it land on an induction charging. And so we can do that as well, and we can combine it, plus these other functions. So we were looking at, like, how do we modernize the way we're doing power and in keeping with what's happening with robotic warfare. And we felt that we actually had a solution which was superior

The hydrogen value prop

Very good. hydrogen fuel cells have genuine advantages in endurance and energy density. and it matters for long endurance missions. But many believe that the reason hydrogen drones haven't taken off isn't p- just an infrastructure gap, it's that batteries keep getting better, cheaper, and simpler. It appears the drone market has voted with its feet for a decade. What would you say to this audience?

Well, I'd agree with it for a lot of missions. So if you're talking about a kamikaze drone that's gonna be launched, 15 minutes away with a payload and blow up, that's a, cheap is the best, right? The, the, the high volume attritable systems that can be made are what we need for munitions. For a lot of other applications, which could in- include shorter range, ISR where cost matters, it's good too. So we can still charge those. We're not, in any way diminishing what the advantage of that is, and increasingly we'll see drone swarms, right, where they'll pr- five or 10 drones and take out, an incoming, attacker. So we'll see increasing that kind of warfare as well. So we're all for that, but the difference is they can't fly that long currently. the only ones that can really do the longer, duration flights are using in, internal combustion engine. They're using gasoline of some kind, some kind of fossil fuel. There's a few hybrids that are coming out that are hydrogen plus a fossil fuel. but really the hydrogen advantage is longer, longer range, longer duration, and the challenge, as I mentioned, has been the fuel supply chain, but if you can solve that, it's better for longer range. It's also more expensive. you compare a Z-1, that's probably about a $400,000 drone, but if it can fly indefinitely for months at a time, that's a good investment 'cause it can come back. But a lot of the other missions, they're just gonna get destroyed, whether it's counter-UAS or a kamikaze mission, well, that's fine, then the cheaper the better. So we don't, we're not saying one is better. We're just saying we power it all. But there's a unique advantage in having, working with the best drone and the best refueling solution to have the best solution out there for those who want it

So from your vantage point with the conversations that you're having and, and the engagement that you're getting from these partners, in defense, what do you see as the likely path that this technology can take to go from evaluations and piloting? And yes, there, there's funding for that type of, of effort, but there's a big gap between success there and then getting into broader, regular, ongoing adoption in some of these mission profiles. And from your vantage point, what do you see as the path to cross that gap and see this technology actually get that level of adoption? Because, it, it seems that there are a lot of dependencies, and, and hurdles, whether operationally or other, that both the customer as well as the industrial base have to overcome in order to realize this. So from your vantage point, how do you see that playing out?

Yeah, great question, and actually it's something the current administration is doing, I think, a good job of overall in terms of procurement in the military to streamline it and to look for higher volume, faster to market, more commercial COTS, commercial off-the-shelf solutions. so I think that's an important part. When we get asked for a lot of our You know, project submissions or they're buying them. These aren't just pilots. They're being purchased out of, appropriated funds. but they ask how fast can you make 100? how, how, how long will it take you to scale up to 1,000? So increasingly, this- these are not looked at as exquisite systems that cost a fortune and take years to make. they wanna know, can you be, in a year, can you be making 100 or 500? And, and that's a key part of the question. And so that becomes not only do you have a product, but your factory is the product, right? So how fast can you make things? What's your manufacturing flow? Have you designed for scalability? What kind of supply chain do we have? Those are all things that we've been addressing to be able to scale up, and we, can scale up to be making instead of, dozens a year to be making 100 a year in a year and then up to 500 a year within three years, potentially faster. So, that's the kind of work that we're doing to be able to scale up. And then the other part is dual use is quite important. So there's still non-military uses for these. Now, hydrogen drones like a Z-1 are pretty expensive, but they could make sense for, border patrol, for example. And as you look at the infrastructure challenges that we face right now, every dam, bridge, military base, big power plant, it's a target for bad actor drones. And so being able to defend those and, is key. And so it's not only counter-UAS, you have to know where they're coming, right? So the sensing and the surveillance is important. So I think in these highly valuable key pieces of infrastructure, there will be the cost justification to be able to have higher priced, but more enduring, ISR solutions like a Z-1. And then, I think there's smaller drones that are hydrogen powered too that will be coming, and they'll be great for law enforcement or even in extreme weather events. You always have the aerial view. Right now we send pilots up with lots of JP-8, but that's a perfect thing for drones to do is just provide continuance monitoring after extreme weather events. So I see that they feed one another. The- they each present different use cases and different kinds of volumes, but together you can get to a higher production and, a price volume curve that's attractive. And so we think about it as all of a piece like that, to answer your question, Peter, that you have to have dual use. You have to think about the volume production. You have to think about the price points, stabilizing and getting better with time and the volume and, that that's how we can have a solid, reliable source, going

Diving into the numbers

forward

Lauren, correct me if I'm wrong. I think I've read somewhere in the company's marketing materials, the drone refueling NanoGrid, about a million and a half in price, and, the promise is 24/7 operations for six months uninterrupted. and I'm really curious to dig into the numbers a little bit so I understand better. So, let's trace energy coming in and out, if you don't mind. if you start with the trailer itself, how many kilowatts of solar capacity does the trailer have?

it could be a trailer or a Conex depending on what form factor is desired. But on a standard Conex or let's say 20-foot trailer, we're gonna have a s- a deployable solar array of eight to 10 kilowatts. it can be more if it's a bigger trailer, but, the, in the military, they like the Conex 'cause it's easy to transport. So that's the typical solar array

Okay, let's say it's 10 kilowatts, and then how many peak hours equivalent in a day where you're deployed? Let's say five

We average at like five, but obviously in the Middle East it's higher, in the Pacific it's higher. If you're in the Arctic, it's a lot lower. So it depends. It's, where you're located is a very big, piece of that

Okay, let's go with five. So that would be 50 kilowatt hour, of electricity per day. now that 50 kilowatt hour feeds an electrolyzer,

into batteries first. So all the solar goes into the battery, and the battery's managed through battery management system and the inverter.

b- for the hydrogen piece, it then feeds the electrolyzer, right? Okay, so that's 50 kilowatt hours, divided by what? 55 kilowatt hours per kilogram, for the benchmark for the electrolyzers. That's roughly 900 grams

you can make about a kilo- a little over a kilogram a day in ideal conditions. But again, it's going through the batteries first

Okay, let's say it is a kilo of, of hydrogen produced per day. And then, and then I think before you said that the Haven Z1 drone has a 400 gram canister of hydrogen that's good for eight to 10 hours of flight.

So that's two and a half canisters. so, that's

so that's two and a half... so for continuous operations, you would need, you know, three of those. so 1,200 grams for continuous 24-hour operations of the drone versus 1,000 produced.

we arrive,

running a

piece. We arrive with 10 kilograms of stored hydrogen in a solid state. So we don't, we don't even have to worry about any solar panel or battery. We arrive, take that hydrogen, pressurize it in the canister, and we have 250 hours of flight time in that stored hydrogen before we make any hydrogen. That's the sp- that's the

Okay, so, storage is 10 kilos and you're running a daily deficit of 200 grams.

And so that's why You have

So that would

have battery of 80 to 150 kilowatt hours

Okay, so on the tank itself, that's a 50-day reserve. So how do we go from 50 days to six

you keep making it. You make it as you are using it.

but you're running the same deficit every

but you're starting with this lead. You're starting with the 10 kilogram reserve while you make it, so that covers the deficit. Plus you have the battery storage

but my math was with a daily deficit of 200, and a starting, tank storage of 10 kilos, you produce always, but you use always daily, and that means that you're kind of depleting at the rate of 200 grams, which is 50 days worth of the

But you left out the battery storage. So the battery storage has all the stored hydrogen that is making more than you might be using, and so th- that's the extra buffer. So it's 80 to 150 kilowatt hours of battery storage. So the solar goes into the battery, the battery powers the electrolyzer. It's first using up that battery, and that's continuously being powered by the solar. So you have reserve in the battery, and you have reserve in the, in the stored hydrogen. Now practically speaking, it's pretty hard to run it 24 hours a day. They may only run it two sorties of 20, of eight to 10 hours each, just for the human time, right? The human factors side of it to make that happen.

how many of your nanogrids in this hydrogen drone use case, have gone through the six-month cycle of, operational use already where you have real world

We, we just have our, our test data from our factory. We don't have the real world, but we have run the simulations of it and we have these other examples that I've told you with, that have been balanced by, it's the same equation of what the draw is like in Wismer, of what the power draw is versus the storage, the sun and all of that. You ma- you make that work and so the secret is the extra storage. Your math is completely correct if you're just going solar to the electrolyzer to the use. But we have stored hydrogen and stored battery power and those are the buffers that allow for that additional operation

I understand it just feels like it's a big leap to go from 50 days of capacity to six months due to the batteries. But, you're probably right. I, I don't have access to all the details. But it is interesting

Yeah. Well, the, the, the thing is to think about these asynchronous functions, right? So you make a lot of hydrogen and store it, and you could have more just, 10 kilograms. You have to think about the weight and all the different offsets of how much it all weighs. You could have more if you need it. If you were gonna go to an arctic location, you would probably take a lot more stored hydrogen. and you might need less if you're in a very sunny location in the Indo-Pacific or below the equator, you wouldn't maybe need as much. But you kind of m- save the amount of stored hydrogen, the amount of s- battery, matched to the power draw. And continuous operations is probably the most is a 16 to 20 out of a 24-hour day just because of humans having to sleep, right? If we have robots doing it, which is part of what we envision in the future is not too distant, is robot as a service managing a lot of these functions, then you don't have to sleep. And so then your, your math is more on it. But with the stored power and just the ability for humans to have to have some rest time, it works. It could work even longer than six months, but everything needs maintenance at some point, so we don't wanna make a longer promise than that. But in a classic mission of 30 to 60 days, it definitely is high-functioning unless you're in an arctic location

What are you hearing from operators, again, on the value proposition for hydrogen drones? totally get the point that there is a slice of the market that values, these long endurance flights. but then, y- the, the big argument on the physics side is that, once a solar panel produces one kilowatt hour of electricity, you know, say two things can happen. On the, on the battery path, about 75 to 80% of that, electricity reaches the drone's rotors and propellers. but on the hydrogen path, only maybe, what, 25%, of that electricity reaches the drone. And so, again, you know, how thick is that market that values the additional cost and complexity, and the energy losses, for, that many hours of flight time as opposed to more elegant, simpler solar to battery, swappable battery type of concept of operations?

Well, again, it depends on the mission. I mean, for a lot of counter-UAS, swappable batteries or induction charging is a better way to go, to just run lots of soirees of, small drones. and that might work great. In certain locations where you have a very wide range you have to survey, you've gotta go, 100 or miles or more, that's a challenging proposition. And if it's a key area, the value's priceless. So I think it's... there's certain markets where the intelligence, reconnaissance, and surveillance challenges are difficult, that long duration, low signa- low detection signature drones are ideal. And then even in things like, extended border, north and south, long, big areas to survey and limited people to do it, being able to go a lot farther, per, flight is a win. So I don't think this is a huge mass market, but it's a large and strategic market. And, then, we still have the other markets. I mean, we're not saying we're not gonna charge battery drones. We will. We like actually the combination of them, as I mentioned. So you've got surveillance drones, and you have shorter flight ones that might have a payload. that's a very interesting, opportunity to be able to do both, and that sets us apart

What's the state of the hydrogen drone market

Hydrogen drone market

today?

It's small. There's a few players, but, there's some, that are happening in Europe as well. there's just a few players right now and a couple smaller quadcopters in the US. Haven't started in Israel because of, October 7th war. so they had some early operations there with small quadcopters, but they feel like the Z-1 and ones coming after that are bigger, that these are gonna be, important markets for them. So it's early, but that's when you're a leader in technology. You wanna be with the early market leaders and the early adopters, and because if it gets really big uptake, then we'll see smaller systems be developed. It'll be at a lower price point

what's limiting the hydrogen drone from being successful? Limited missions, high cost

Well, I think there's a lot of missions if the cost, gets into a place that's commercially acceptable. As I mentioned, extreme weather events, and protecting infrastructure. It's a little high at 400,000 for, some of those budgets, but I think we'll see that price come down and then, our price too as a command center, but that's not out of line. I mean, plenty of command centers are million dollars and up. So we're, we're nothing crazy, and we make our own power. So a lot of the command ces- centers that are out there have to be diesel-powered. so being able to be self-generating power for the command center and then run battery or hydrogen drones or other things, ground robots, s- unmanned surface vessels, we can power any of those things. So for us, we're agnostic as to what the robotic is, whether it's hydrogen or battery. We wanna do it all and be the one place where it opens up, can transport it, house it, get the edge compute comms to who needs to have it. That's our positioning. We don't make any of those drones. We, we've just aligned with Heven because we thought they have the best one in the market

And let's say the, the head of Heaven is in our discussion right now. how much of the implementation opportunities does he have are solved by your capability? Or is it a small percentage of a small percentage?

we're not all of their case because some of theirs are just gonna be... It folds that, it's a 14-foot wingspan drone that folds into a two-man portable case. So they could put that in the back of the truck with a canister or two of hydrogen or some small scale field production, and they could use that where it needs to be a very discreet short mission. And that's, I think, a good size market for them that doesn't require us. but for a longer duration in conjunction with these other components, that's where we set it apart. They've got another feature which is quite interesting. They have a large investor IonQ quantum computing, so they're able to do, when there's no GPS in contested environments, they can navigate and there's a lot of, precision communications that are gonna be from drone to drone that's gonna be empowered. I think when all those start to be recognized by the market, it's clearly the most advanced, drone technology. They're still having to scale manufacturing. we're probably ahead of the curve on that from them. But I think once they get their... They raised a lot of money, $100 million at a very high valuation. so I think they will begin to scale their, their production. But they had bleeding edge technology that's now gonna, it's looking for these dual use markets, and not just military. I mean, as I mentioned, border patrol and other types of civilian markets, infrastructure protection, these are all in place, important places for, long range ISR, long duration ISR flights

And Loren, Lockheed, I think back in 2013, they've demonstrated an eight-hour fuel cell drone flight with the Stalker XE drone. what changed in the market in the aftermath of that? Or since then, what were the key learnings out of

I think Border Patrol bought four or five of those, and, the performance was good. They're long range as well. They use a high-grade propane, research grade that's also a fuel supply chain challenge. So I think they would have to solve how are they gonna get that easily in the field, because that's probably harder to get in certain areas than or, or hydrogen would be, right? So, I think that's their challenge, but they demonstrated that there was, an interest from Border Patrol, but it was early stage. We've talked with Border Patrol combined. We just were at an event where they... And there, there's a lot of interest. There's a lot of interest from all the military branches. When I first started talking hydrogen to them, two years ago, it was like, "No, no, no." It's like the Hindenburg fear, right? "We can't handle this. There's no way." Even at a big planning session I was in last fall, there was interest but skepticism. And the difference is now, there's like, "We wanna try it. We wanna buy it. We think we need to use it." I mean, Army Corps of Engineers has made two different hydrogen labs. the Marines are looking at it. SOCOM is. They're, they're all s- recognizing this might be a better fuel we needed in our, we needed in our bag of tricks. They're not gonna change everything to

Okay. But two years ago, what were their, what were their stated reasons for skepticism for, or for not being interested before?

The trend, the main one that we heard was, the risks of high pressured h- hydrogen transport and the difficulty of getting a local fuel supply chain, and then not seeing it as being energy efficient for some applications. Those are the big, knocks against it. But now increasingly

Contested energy logistics

the logistical complexity would persist. So w- what has, what has changed,

Well, w- a contested world

why is there

supply. I mean, JP-8 and f- diesel are at risk right now. I mean, being able to get fuel at a readily when anywhere you need it at a reasonable price, that's just going up. I mean, in certain, know, recent contested operations, I've seen some of the data, it was up to $1,000 a gallon by the time you counted the fuel, the car- the logistics of it, the people, the convoy, is very, very expensive. and then having every time you bring the supply, the resupply plane in, it's a target, and not only target, the fuel bladder is if you can get that too, it'll blow everything up. And so, these put things at risk. So if the... There's a real recognition that's happened in what they used to call operational energy logistics. Now they're, they got a new name for it, but they're streamlining that, where they are quite concerned about the cost, logistics, and human life risk of transporting, JP-8 and diesel over huge distances like in the Arctic or the Indo-Pacific, or in contested environments where you can't just stop at any port and refuel. Like that's a, that's a risk. So they're seeing increasingly that you've gotta make power at the edge, and they're adopting in all of the above, including small nuclear, and part of our consortium is that, small nuclear. It's hydrogen, it's different kinds of hydrogen generation. It's different kinds of hybridized batteries. they're not gonna throw out their Cummins generators overnight, but hybridizing those, generators with batteries, they recognize that that's the future. They've got to reduce the power need, so s- insulating shelters, doing things like that, and be able to produce more of it at the edge and, and they even have a new microgrid standard in the Army. So that's changed the last three years. That whole way of thinking of just, "Oh, we'll just take fuel anywhere, anytime at any cost," is no. We need to be able to make power at the edge when and where we need it, and to enable smaller, more nimble missions of specialized war fighters with specialized tools like robotics. That's modern warfare. And so Ukraine, I would say, is another thing, has changed everything in how they view, how you solve the threats that are incoming. And so it's a very... It's not that something changed in hydrogen. It's the world changed so much, they've changed their view about what's acceptable

I'm gonna ask Peter and Luka a question. The mainstream drone market listening right now, they've been listening to an articulate, discussion around the value of hydrogen in certain use cases and with hydrogen drones. What do you think the mainstream market's saying right now when they're listening to this, to this episode? What do they think is intriguing? What would they be highly skeptical of?

Well, I think if you're talking like...

Um, and if you don't mind, that's for Luka and Peter. I want them to, I wanna hear what they think people are thinking as they're listening to this episode

My impression is that the value proposition is pretty thin in the mainstream drone market. And on the one hand, yes, you have the, the higher gravimetric energy density promise of hydrogen, but it comes at a cost of, additional overhead and cost and complexity, and, engineering. Um, and at the same time, batteries just keep getting cheaper, better, simpler, more manufacturing capacity is coming online, and it is, you know, good enough for 90% plus of use cases. And so I think that market that values the additional endurance, as we talked about, so far, i-in my impression, is relatively thin, and I'm not sure if it is solvable by infrastructure. That's the piece that I'm struggling with. I don't, I think, it is part of the solution, but it's not the thing that would tip somebody over to adopt hydrogen just because they might have local hydrogen production. It's my guess. I don't know. What do you think?

Peter?

Oh, I, I wonder how long the, the window and the mission set is gonna remain open with the... Fundamentally, drone flight is becoming more efficient. There, there are companies that are engineering much more efficient long-endurance quads, as just one example. and that's m- almost in some ways an aerodynamic improvement, but also a system-level improvement in the drones. and then of course the energy storage of electricity, the battery technology is getting better. so does the window that exists in the market right now, does it persist or is that a window that is, getting squeezed off? That, that's

So let me, me ask this question. Very good. Very good, Peter. Let me ask both of you a question. Let's say there is a market on the edge. Let's say there is a, a, at least some kind of a viable market that gives hydrogen drones an opportunity and, and Lauren's company an opportunity. What do you think about the technology? What do you think about it's, their ability to execute? Do, do you... Forgive me, Lauren. Do you buy what Lauren's saying? Or do you think it's, reasonable based on how she describes it?

Well, I think the proof is in operational data, and I think as it relates to this particular use case for hydrogen production, as Lauren mentioned, it's at the simulation data level yet. once you have enough operational data to see what l- what tempo of operations you can actually support, in environmental conditions that are, the kind that you would expect out in the, in the field, what the maintenance requirements are, how does that compare to a diesel generator that you can buy for $20,000 and that you have 80 years of logistical infrastructure and, and knowledge, and experience built around those. Those are the questions that are still, outstanding, at least from my perspective. Lauren, I don't know. I-- You know, perhaps you have all the data but I, I'm, I'm inferring from the conversation

Well, first of all, we're not, not doing batteries. We're doing battery drone charging too. So I agree that it's, everything's gonna get better, though I think the availability of rare earth minerals is gonna get less, and that's gonna put some battery challenges until we get to viable solid state, batteries. and we have had some real f- in the world data with, some military, like the one I said in White Sands. We just have to apply it to, the, the hydrogen drone. But I think that these are the ability to have this edge of longer duration today. They're gonna get better too. Just as the aerodynamics are gonna get better, Peter, on quadcopters and everything else, so will they get better for hydrogen. I think all of these are going to improve, and if hydrogen turns out to be a better way to, have a longer, safer duration without the thermal detection issues, that's gonna be a win. And, unfortunately I don't see the world getting less complicated or less contested anytime soon. In fact, I think it's gonna get much worse with threats from space, s- focused solar power from space, focused laser power from space. I think w- we're just talking, a couple of dimensions here. Like we have to add the space dimension and, it changes everything as well.

Lauren, How much of the energy produced today in military deployments is at the edge?

Well, let's see. A lot of it I mean... Oh, produced at the edge? Very little. No, they bring, fuel to the... They bring fuel in bladders. Some of it is at, when landing, if you roll off the C-17 or C-130, there's another fuel convoy that will bring fuel, and it will have a lot. A typical pallet on a C-17 has, several 20 kilowatt Cummins or similar, generators. Increasingly they'll have, hybrid batteries, so they're bringing fuel and producing that at the edge. They're looking for local fuel supply cells, chains, and, and supply sources. But what they wanna do is not be dependent on that. They want to not have to have those fuel convoys. They see that as key to the future mission, is being able to self-generate power at the edge for 30 to 60 days with no resupply. That, they feel, is a strategic g- change in direction

Okay, so earlier we talked about how cost is driving a lot of that desire to produce energy at the edge. But how much of it is cost versus the vulnerability of existing logistics tails, especially in a, in an Indo-Pacific, theater context? And the reason I'm asking is if, if they solve the logistics tail piece with, again, perhaps some other kinds of unmanned contested logistics systems, then, then is the cost palatable to the point where they can still, fly in energy as opposed to setting a footprint, of nano grids wherever they go?

Well, I think that applies to all the new energy sources they're looking at, including small scale nuclear. I mean, the human cost is the biggest cost because lives are lost in that su- fuel supply chain. You follow it, you know where the target is, you blow up the convoy of fuel and the target with the explosive fuel. And so, so many lives have been lost. That's the biggest one. And then the vulnerability of being detected. So if they can eliminate that, they have, be at a lower profile, more stealth mission for a longer period of time. I think those things are driving it. Next would be streamlining logistics, which is cost, but it's also just resources. Not only money, it's all the humans involved in that complicated supply chain of sourcing it, getting it on the plane, delivering it where it needs to in a truck to the... it's complicated, and it's different in the Arctic versus the Indo-Pacific versus the Middle East. So it's the complexity of that logistics, the cost of that logistics, the human life cost, and then how can you have a more stealth mission, less detectability, more survivability. All those things are in the equation of what they're looking at

And hydrogen drones or some other use cases that might rely on, mobile nanogrids, when you compare those to, things that consume a lot of energy, tanks, artillery, aircraft, power units, bu- facility support, all those kinds of, power-hungry units, how needle-moving is the If they're going to haul, energy in a existing logistics trail, then just adding another ton of something to power the drones, is that not a better trade-off, or how is that trade-off compared to setting up a dedicated nanogrid for that use case?

Well, I'm not saying we're not using tanks anymore, but the volume is gonna be more to the unmanned robotics as opposed to these big equipment that need a lot of power. And then in some of the unmanned laser stuff, they're gonna beam power from space. They're gonna have focused solar, they'll have specialized satellites. I mean, it's gonna be scary actually what's gonna happen. So, I think all of that's changing. What you described, Luka, is pre-Ukraine. They still have tanks, of course, on both sides, and that was a big failure for Russia to be able to maintain those tanks. You remember their treads fell off and everything else and got stuck in the mud, and they couldn't get fuel to them, because of the weather conditions. I mean, those are all the reasons why, you know, using robotics, fewer humans and less stuff to ship around is better. And then if you can make the power at the edge for those robotics, that's the modern warfare. And so I think that will change. Not, not that we'll never use tanks or we'll never need, some of those big hunkin' machines. I love to see them. They're cool. but I think that the volume is going to... Certainly the way they're spending the money and they're allocating budget, the volume is going to go to, certain exquisite aircraft, but the high volume is gon- I mean, the high dollars is gonna exquisite aircraft, but the high volume is gonna go to robotics

Competition

Lauren, how many other companies are doing what you do today?

Well, there are a lot of companies that have solar and battery combined in various types of boxes of one type or another, whether they're mobile or not. I don't really know the count, but there's a lot. and there are a lot of different kinds of hydrogen production companies that are coming out there. But there's so far no one that's doing all the things that we do to fully integrate it and do it in a way that one person can set it up in 15 minutes. So the incumbent is, as you've been talking about, JPA diesel fuel, big generators. that's who is the status quo. There's a lot of reasons to change that, and I think if they can really get the small nuclear working, that's gonna become a, a good, alternative as well. and they're even doing wind, They're looking at different ways in certain locations to use different kinds of sources of power generation. So there are many companies doing that, but there's a small group of us that are helping to lead the charge. and we're unique in the way that we have the storage, the hydrogen storage, to make that much simpler value proposition, and then the integration and the open systems view, and that we can be a node in a microgrid, or interoperate, or daisy chain, or we can hook up with any of these. I mean, we could have a Cummins generator back us up. I mean, there's no religion here, right? If we need to use that JP8 and a big Cummins 20 kilowatt because they need some more power, it's not enough sun in that location, to Luka's math point, hook up a generator or a big battery or anything else. So they're looking more and more at how do you have interoperability among the power sources, as opposed to you just have to drop bladders of fluid somewhere. It gives more options. It gives greater optionality and flexibility

And what's the per kilowatt hour cost of electricity from your nano grid versus a diesel generator?

Well, that's not a direct comparison because you'd have to have the diesel generator running a trailer or a Conex that does all the stuff that we do. So it's not an apples to apples comparison

Well, okay, but let me push back a little bit, because as you're positioning the company, it is about power generation, and the unit of power that is ultimately consumed or energy is a kilowatt hour. So on an energy unit basis, what is the customer, spending when everything is accounted for?

it's, that's a hard thing to answer because if they paid $1,000 a gallon for JPE to get it versus we're producing it on site, but again, we have warfi- like say the Marines, there's eight war fighters inside there working, so it's shelter, workspace, comms, water generation, and power, and it makes all its own power. There's no fuel supply at all. So they, there would be a big loss trying to say what it would be to have a generator. It's not an easy one to answer just with a flat so many dollars per kilowatt, because it depends where it is and what the function is and, and, what the alternative is. in an unmanned one, like we were having at White Sands, that's perimeter security. Okay, two soldiers not there 24/7, as opposed to a Conex box worked 24/7 with no f- no generator, no power. So it's more complicated than just the pure power equation. It's the use, the use case. It's not like here's a generator sitting somewhere, and here's a box of batteries, solar, and hydrogen. I mean, ours is

Well, Define a use case where you would talk about the cost of the diesel engine versus the cost of your system. you you select the use case and give us a comparison, please

Well, you look at, certain, let's say, emergency response, what they call MEOCs, Mobile Emergency Operating Centers, and they do what we do. They can go for three to days to 10 days or whatever in a location. Let's say the power's out. Well, first of all, that costs about a million dollars, and you have to keep feeding it fuel all day long. We can send ours for about half that cost, and you don't feed it any fuel for the duration of that. And so actually, we win. We have a lower cost of ownership, and we have a lower initial cap cost for that. and kind of the, the power per kilowatt is... I mean, how do you compare that, right? They're, they're feeding gallons and gallons of diesel all day to keep that MEOC going, and we're just turning it on, and we have the same number of people, half a dozen people, working inside and out, providing emergency response solutions. The barrier is just it's new. It's different. I think, Luka, you touched on it very well, which is the, what keeps this from mass adoption. Com- complex to them. It seems complex. It seems difficult to use. It isn't actually, but you have to get over that hurdle of explaining it and showing it and having people do hands-on, because they-

Well, you succeed, you succeed when the alternatives are not available

That's when we're best is when you just can't do it otherwise.

Let's say we're in a, let's say we're in a board meeting, Lauren, and, and your, let's say your investors are in the room, and they said, "What stands in the way of your wild success?"

What is required to succeed

Oh, well that's a completely different

Is it... I- I mean, is it... how about just success? put on the whiteboard. What's one, two, three, four, five? it, one is the available market may be a bit of a challenge, I'm not sure. But what are the things that stand in the way of your great success? I'm impressed with your articulation of your capabilities, of your value. I'm curious to know what, what has to happen

The number one, challenge to success is manufacturing in high enough volume for, to meet the need at the price that's gonna make it the most competitive. That's the number one. So that's why I said earlier, the factory's the product. Thinking about, automating systems, embedding more AI into it, simplifying the... You know, we've on, we're on generation three and four of some of our components. like we've really improved the solar array deployment. That's on generation three And we need to further streamline and make it more manufacturable with fewer steps, str- im- improving our supply chain. We'll raise a, a significant amount of capital. That's probably the second. First is manufacturing and volume. Second is the capital needed to go fast to really, not be as reliant on the supply chain. Capital allows you to have higher degree of vertical integration. So today we have a, a supply chain that we use, that we make it all in Michigan from all US, made in USA components. And then the third is distribution. So we've really worked with channel partners that already have the customers, that we're selling them something new. So when we sell to, some of the federal government and military, we're using primes that already have contracts. when we sell to this huge opportunity in the Arctic and in Canada to keep cell towers up, we're working with one of the top, resellers of power in the world for that. We have some regional and lo- location-based channel partners like in the Caribbean and in Latin America, the southern part of the US, and they already have large customers. So it's manufacturing at scale, it's the capital needed to grow it all, and it's distribution. That's the one, two, three. We've proven the technology works. We've proven it in the field. We need more data, to Luka's point, to give you the same numbers on the Z1 that we can give you without flying a drone, but we can show that it'll work for 13 months unmanned s- no fuel supply chain. We've proven that over and over in multiple locations. We just have to do it with this new application, and we've sold repeat systems to our customers, so we do have the quote unquote product market fit. But yeah, that's the big one, two, three. Manufacturing at scale, capital, which is key part of number one, and distribution to get it. This is a huge market. Every island nation in the world needs this with extreme weather coming, for fragility of the grid, for ability to have, fast response. Every military, that's of our allies and us that we would wanna sell to needs better surveillance and power for robotics. Every city and county that faces any kind of emergency, we don't have too many in Michigan, but City of Ann Arbor, which is one of our customers, just had a huge tornado there. every city and county needs one or two of these. They're buying diesel power. It's a very, very big market. Our, it's minimally

How do, what's, how do you, what is the total available market, would you say?

It's $100 billion and probably bigger. That's our, that's our d-

and what percentage would you say is aviation of that?

Oh, that's a smaller piece. I don't have a, I don't have an exact number for that, but it's a smaller one

Y- you, you mentioned manufacturing at scale so you can become more cost competitive. when you say that you want to become more cost competitive, then what is the relevant metric especially given the difficulty in, in an apples to apples comparison that you talked about earlier

well, we think we can easily take, with economies of scale and better design, 20% out of our manufacturing costs. So that's a near-term target. It's not like it's gonna go to zero or, or, 80% less, but we can get to 20%, with steps, both economies and improved design. so that's, that makes a big difference, I think, because again, at volume, the military, we need 1,000, the price matters, right? It's, we, this is good that our current administration is looking at, higher volume and better lower costs and getting to market faster. I'm all in favor of that. Using off the shelf more and more that, that gets added to, to meet a mission versus exquisite designs that take a decade to get to market. So, but we think we can take 20% out. There's not like a price, a dollar per kilowatt driver for it. It's just, f- if a million and a half to have a Sesame drone could go, to a million two, that just is easier sell times several hundred of them. but it's not the price is the limiter, we just want it not to be the barrier So I think the manufacturing at scale, seeing these economies of scale translate into the commercial sector, then that does matter. I mean, cities and counties definitely, have discrete budgets and being able to meet those budgets. But it's also we wanna be able to sell it in different ways. Today we sell everything as, for sale, we have maintenance as a recurring revenue. we will have robot as a service. We're launching later this week, you can look for it, our, our Vue Nano, remote monitoring software platform. So we'll have, some software revenue. but I think the big way to reduce a lot of the friction in the commercial market is providing this as a service, our mobile nano grids as a service so that they can be rented or leased. and for rural... look at rural communities, they just don't have the budgets, even if they share. But if they could rent it as needed or have regional sources there and share it amongst themselves, that's a way that you could meet the needs of smaller rural communities. And we wanna be able to do that. I mean, our mission is to help all these, first responders in communities everywhere in the country where they need to provide power, water, and communications after a disaster. We wanna be able to do it, so we need to find ways to sell it to them or price points that that will work. And we wanna be able to justify for military purchases high volume. So, there's always a desire to make it better, make it a little cheaper, but not to sacrifice quality. And then we're not gonna really go to low-end downsize. We're looking at being a solar from space receptor and robots as a service, what other ancillary functions can we do? How can we really have this be able to be set down and be as automated and unmanned as possible to meet the mission?

How much capital are you looking for, Lauren?

we're still determining that. It'll be a s- a significant amount. we've, we'll be profitable this year. We've done it all the old-fashioned way by, sales and keeping a lean ship. we've raised about 5 million in capital to date, so, and got, commercial deployments, multiple products, repeat customers, channels, 14 issued patents, a couple pending. And we've done a lot. We're very capital efficient, but a lot of these big moves are gonna take significant amount of capital

you're a very articulate spokesperson for your capability, Lauren. this has been a really good discussion. Is there anything else you'd like to be able to leave with our audience?

Well, you got a really interesting... I mean, first of all, I was thinking, who listens to something for an hour and a half? I was like, I don't even know if my own mother would wanna listen to me for an hour and a half talk about hydrogen.

of people.

But I know you've got some really smart people out there, so anybody who's really interested in this to be a partner to us, whether it's technology, distribution, help in manufacturing, if they wanna be an investor, I invite your very elite listeners to contact me, lauren@sesame.solar. I would love to hear from you. I would love to, follow this more, this, 'cause I really didn't know a lot about your podcast till I started listening to it. You have some fantastic people that have been on. So I would love to reach some of your audience and just let them know that we're looking for really smart people that wanna help us.

Great. Lauren Flanagan, thanks for joining us. Good discussion

so much