On The Brink with Castle Island - Alexandra DaCosta and David Yi (Aspen Creek) on a New Model for Renewable Mining (EP.356)

Episode Date: October 3, 2022

Alexandra DaCosta (CEO) and David Yi (Chief Commercial Officer) join the show to talk about Aspen Creek Digital Corp.'s fundraise and their model for additive renewable mining. In this episode: What was it like raising for a mining firm in this environment David and Alexandra's backgrounds and how the came to cofound ACDC Why ACDC is pursuing a 'power first' model and what that means ACDC's wind, solar, and battery approach to energy Why ACDC focuses on additional, new renewable generation How mining behind the meter with renewable sources actually works Why intermittency of wind and solar is not a dealbreaker for Bitcoin miners The merits of going behind the meter for a Bitcoin miner The importance of the Inflation Reduction Act for renewables Industries are becoming more location agnostic overall Are Bitcoin miners doing a sufficiently good job of disclosures around their energy mix? What is the feasibility of batteries at grid scale? Are Bitcoin miners interfering with the market signal indicating where transmission should be built? How Aspen Creek pairs demand response with renewable incentivization How Aspen Creek affects power prices paid by households Read more: Aspen Creek's fundraise announcement   ACDigitalCorp website Intro and outro music: Daniel Allan's Collage #344

Hello and welcome back to On the Brink. I'm Nick Carter. Today I'm sitting down with Alexandra Dacosta and David Yee, the CEO and Chief Commercial Officer, respectively of Aspen Creek Digital Corporation or ACDC for short. They are a renewable focused miner aiming to build out additional new renewable generation, so not just to use renewable assets which already exist, but to provide net new energy assets to the grid. They are aiming to mine behind. They're aiming to mine behind the meter. So they're not necessarily competing with households for energy using a portfolio of solar, wind, and batteries, which lets you get to very high up time while relying on primarily renewables. I think their business model makes a lot of sense. And it answers the critics in a very

direct way. Although, of course, they're not doing it because of the critics, but because it's economical and sustainable. David and Alexandra are subject matter experts. This is a great conversation. Let's dive right into it. Hello and welcome back to On the Brink. This is the mining miniseries. It's been a while. Honestly, we haven't done a mining miniseries in a long time. This is a very extra special episode with David D. and Alexandra DeC from ACDC.

Do you prefer ACDC or Aspen Creek? We like ACDC. It's hard not to. It's a very clever pun, which is pioneering a new model for mining, in my opinion. Both of you welcome. Thanks for joining us today. Thank you for having us. Yeah, thank for having it, Nick.

So I've been wanting to do this episode for a long time. Full disclosure, I'm a personal investor in ACDC. Tell us a little bit about why you decided to go for mining. Why into the business of mining, especially at a time as difficult as this in Bitcoin mining land? Alexandra, why don't we start with you? Well, to be fair, when we made the decision to go into this business, it was at a very different time in Bitcoin mining. The decision was made last year.

My background is in fixed income in banking, and structured products specifically. And I had pivoted to ESG and impact investing. And so I was really focused on the climate tech side of things. And looking at Bitcoin mining as an opportunity to really interplay with renewables is what attracted me to the space and my conversations with David. David, we had a great conversation when, you first, I think, pitched ACDC to me.

But yeah, tell me a little bit about your prior history and why mining was so interesting to you. Yeah. So I also have a corporate finance background working in banking, had jumped around at a number of shops, mostly working in the metals and mining space. And then recently was lead of crypto investment banking at an investment bank.

And in that role, has spent a lot of time covering Bitcoin miners. and getting to know them extremely well and understanding what their business model was, through that exercise became just totally engaged and wanted to learn more and be more active in it. So that's really how, you know, Alex and I were able to come together

was your kind of climate tech experience with a renewable background, plus my experience having worked with the operators and coming up with a better solution for Bitcoin mining operators. I mean, it's a pretty, tough time out there in the world of public Bitcoin miners. What's it been like raising through this kind of bare market and through a time where we're seeing a lot of these miners, you know,

kind of struggle to stay afloat. How's that experience been? It's obviously been difficult, but I think this is not the first bare market that either of us have been through. And I think that for us, we've had a really incredible opportunity to focus in on why we're building the business and why it's different. And it's allowed us to really hone in on excellent strategic partners and investors, you know, like yourself. I think that, you know, having investors like you in this space has really allowed us to feel confident in the fact that this power first model is different. To David's point, we saw an opportunity to approach this separately. And so while the actual act of raising has been difficult, it's also really given us.

more confidence that to be able to pull it off in this market means that this really is something special. So there are miners that describe themselves as sustainable or zero carbon. Typically, they are focused on hydro or nuclear in some cases. You guys are a little bit different. I think your materials describe you as renewable focused or renewable driven rather? I find your model to be pretty distinct again. Is the idea that you're exclusively focused on wind and solar or just to the extent possible those would be the energy sources? Yeah. Yeah. So to start, you know, our expertise truly lies in wind and solar development. Our business was founded and in partnership with renewable power developers who have deep expertise

in both wind and solar development. And so, you know, that is where expertise lies. We also think that it is where the vast majority of new renewables will be developed over the course of the next decade. and so it presents a lot of opportunities for us to be able to partner with these new projects. Nick, just to add in there, we will be coupling those solar and wind developments with battery. So I think that that is the other kind of focus from an energy perspective, energy storage perspective. Yeah, so, you know, the environmentalist criticism of Bitcoin mining,

when Bitcoiners have talked about this prospect, is always the intermittency, which is, I don't know, I always find that a little ironic because it's like, okay, well, now you're turning around and attacking the energy sources that are meant to drive the renewable transition. But I would say I haven't seen this being solved or demonstrated at scale from the Bitcoin mining perspective. There's been much talk of mining sort of on a co-located basis behind the meter with wind and solar and then maybe with an element of grid firming, pulling in power from the grid. But I just don't think there are many case studies.

So would you be the first in, you know, minor that would be doing this at scale? And, you know, take us through what that would look like kind of specifically. Yeah. So if you look at the Bitcoin mining landscape, maybe just take a quick step back. There are very few operators that actually have behind the meter power. generation co-located with their mining facilities to begin with. And then taking it and diving deeper, there are very few that have behind the meter co-located renewable sources. The distinction with African Creek Digital Corporation versus the other Bitcoin miners is that all of our sites are

attached to a new renewable power development as opposed to an existing stranded energy source. So, you know, our kind of ethos has always been how can we add new renewable production to the grid and continue to help with the energy transition story? And how can we bring new energy sources closer to where power is needed? And that's a key distinction that we have. And to our knowledge, we are the first, at least in the U.S., Bitcoin mining operator that has a purpose-built renewable project and development for Bitcoin mining. So every megawatt that you're utilizing,

those will be new energy installations added to the grid. Is that the idea? That is exactly correct. And we intentionally size the renewable power development to be larger than our own needs. So you will typically see ACDC representing two-thirds to three-quarters of the off-take of the energy usage for that development. For example, our third site, which will be in West Texas, will be 150 megawatt data center behind the meter

with a 200 megawatt solar development. So 50 megawatts will be going directly onto the grid for the local communities. So if you look at existing attempts to take advantage of stranded energy, there's a whole bunch of different types, I would say. There's obviously the famous case study of the stranded hydro in southwestern China, which powered Bitcoin for a while, at least

during the wet season. There is the stranded gas associated with oil extraction, which is now a pretty popular small scale model for mining Bitcoin. There's definitely some stranded renewables out there. If you look in the in sort of SPP, there's a lot of curtailment that occurs or negative pricing, I guess, which is a consequence of subsidies. And what you're saying is it's all well and good to mine Bitcoin with stranded energy, but that doesn't really solve very much for the grid, I guess. And, you know, I guess, you know, it's fine if the Bitcoin you're mining is low carbon, terms of the electrons that are going into it, but it would be better if it was sustainable energy

plus sustainable energy that was actually additive to the grid. That's exactly right. That's kind of the hypothesis. It is. If you just take a step back and you look at the carbon neutral, we can call it net zero, whatever phrase you want to use, aspirations of the United States over the next X number of years, the fact remains that we need to be standing up far more new renewable energy sources than we are currently doing. And so, yes, we are utilizing some of the new energy that we are standing up for

our own purposes, but the fact remains that over the next two years, ACDC will be bringing online three gigawatts of additional power to the grid. And that's really material, because that's power that will be there. You know, I mean, the usable life of those assets is 30, to 40 years. And so that is a really large contribution to the energy transition that we're all trying to play a role in. Yeah. And I feel like we sometimes lose a sense of scale within these discussions. But yeah, maybe you can give me an example of what three gigawatts, probably about a city, medium-sized city's worth of energy. Exactly. It is a monstrous amount. And so in terms of the suitability of these sources, obviously there's a huge discussion right now in places like

California about, you know, whether you can design a grid around, you know, variable sources of energy. But, you know, in terms of your first few installations here, what is the, what does the energy mix look like? You know, is it solar-based? grid firming, solar with battery, what is kind of the configuration there? Yeah, our first phase of sites will include, we'll be behind the meter with just solar, but we're quickly moving to integrate batteries at our sites. So we will have in the first instance around 30 to 40% of our power drawn directly from solar, that increases to 40 to 50 if we include batteries.

And then in our third phase, which is our, you know, kind of 24% of, you know, pipeline is inclusive of wind. And so we ultimately are striving to get to a position where we have 80% and 90% of our power sources coming from behind the meter renewable power. We will always be interconnected to the grid so that we can firm when required, but more importantly, so that we can provide that physical power back to the grid when the grid needs it. So this is not a completely islanded solution to power like some others are kind of investigating.

is definitely with intent to always be connected to the grip. And Nick, you bring up a good point because it's really easy to have criticize the intermittency of wind and solar, for example. But the fact is, we don't have a better solution yet. Yes, there's also nuclear. But these are renewable resources that we should be harnessing and we are. And so what really excited David and I about this model with ACDC is that it is allowing us to reimagine the data center as this bidirectional node on the grid, as opposed to the last

stop for an electron on the tracks. How do we come up with new software and new technologies that are going to start to allow data centers to really help integrate renewables into a grid? And so when we all start working together, we actually do help build a much more kind of fortified grid than if we're all just operating in our own little pockets and not actually being a flexible load. And so, you know, Bitcoin mining does get a really bad wrap for all of its, you know, energy use. But the fact that Bitcoin mining is such a flexible load that it can immediately be turned on and turned off with no disruption, that's a really big deal. And so to try to learn from that and develop other models based off of our ability to curtail, I think is going to be really

beneficial to the grid going forward. And we should probably start working a little bit more. together with, you know, utility providers, et cetera, to figure out how we can solve these solutions, you know, these problems together. Yeah, the flexible load component was pretty breathtaking to me when I finally figured that out. And I think we're going to come back to that. But just on the energy portfolio side, I guess depending on where you're located, you have this nice kind of inverse correlation between wind and solar in terms of the times of

the seasonality during the day. when they're firing. Is that fair to say? And so the combination kind of maybe doesn't get you to 100% up time, but it sort of does really well. Yeah. I mean, so again, like once we, once we do integrate wind with our solar and battery projects, we do think that we'll be able to get to 80 to 90% self-sufficiency in power. But that's an average for the year, right? Like there may be certain days where we get 95 or maybe other days where we only, we only get 60%, right? So again, stressing the importance of always being connected to the grid.

But on average, we do think that we're going to be able to provide an 80 to 90% switch because of what you just said, that there is a good partnership between the curve of wind and solar. Yeah, I think about it in a portfolio perspective where you want inversely correlated assets in there. and then you know you have your efficient frontier and you know your modern portfolio theory it seems like exactly the same concept from the power perspective so on the on in terms of price like clearly the behind the meter model you know you're saving on transmission and distribution costs is that the reason you went for that just because it's simply more economical well it doesn't doesn't hurt that the economics i mean that there are savings

for sure, but I wouldn't say that that was a sole reason, like Alex mentioned earlier, we've always had the goal of how can we provide, you know, new additionalities of renewables onto the grid. But to your point, yes, in certain markets, and this is all market dependent. Every grid and utility provider has a different, you know, method of charging for transmission. There may be transmission charges, there may be, you know, capacity charges. in those markets being behind the meter does allow us to reduce what those costs are because it doesn't look like we're drawing power 100% of the time we're only drawing power when solar is not shining or when wind is not blowing and if you look around at the bitcoin landscape

I guess the other miners that are pursuing this model and are able to get cheaply priced energy they're doing it with thermal generation for the most part. You're looking at your strongholds or your greenage, both of which have appeared on this show. And so I'm not sure we've seen a lot of behind the meter renewable focus minors. I'm not sure that has actually been a configuration that we've seen yet. There's a reason you don't see a lot of it. It's because it's very hard to do, not just physically, but also from a, you know, kind of interconnection. from dealing with utility providers, etc.

We have wonderful partnerships. But to David's earlier point, the reason that ACDC was started was to really build upon the renewable power expertise that we have in house. And our team has built well over 10 gigawatts of renewable power over the last decade plus. And so they have really, really deep local relationships

in the communities where we are developing these sites. And so it's not as easy as just walking into the local city hall and filing a permit and saying, you know, I'm going to interconnect. There's a lot of really complicated work and expensive work that goes into it. And so that's why when we saw the opportunity, we knew that we had the right partners in order to actually, you know, build on that opportunity. On the other side of the cost equation, we have, you know, the actual generation. So, you know, everybody looks at those like Lazard, levelized charts and sees how, you know, utility scale solar and wind have come down dramatically in the last 10 years. I would say in

particular solar. How kind of reliable is that as a guide? How should people be thinking about that data? And is there also a risk that it ticks back up in terms of supply chain issues? China being the main manufacturing nexus for these things, China being very closed and kind of sort of trade wars developing, things like that. If I look at those levelized charts, how descriptive of reality are they? Yeah, I was, so on that, I mean, agreed, absolutely. The cost of some of this renewable production has come down tremendously over the years. There's always going to be instances where costs may go up because of things like supply

chain issues or, you know, governments putting duties and tariffs on on key components. But, you know, if, you know, if in a market like in the U.S. is going to be a major focus, they have to create an environment that incentivizes this new renewable production. And ultimately, you can't have a new renewable production if the cost is going to be too high. Because at the end of the day, there's going to be no off-takers. And so I think something like this new IRA bill is, going to be a massive kind of tailwind for not only renewable production, but industry at large in the U.S.

And to build on that, David, you're right. I mean, this IRA bill is going to be massive for our space. But it's not just enough to help finance the renewable development. You also have to start getting creative about what you do with that power once. you stand it up. Because historically, the off-taker relationship has been very predictable. You know, you have an investment grade, large-scale off-taker, et cetera. And so that means that you really are limiting the power applications from a counterparty perspective for that new power. And so what ACDC is doing, the reason it's so hard is because we really are breaking the mold

on standing something up to face off against the power development that is different. And so I actually think that we're going to have a lot to learn from our experience in terms of being able to integrate other technologies with these new renewables. And what I actually didn't pay close attention to the Inflation Reduction Act, what provisions in there actually pertain to the renewable sector? There's a lot of tax equity dollars, for example, for renewable power development. I should have this number right at the top of my head, but it's in the 300 million range of a brand new dollars that are going to be coming to the space. And so really what that's meaning is you're bringing new money to the space that's really underwriting, you know, kind of the core risk and bringing the total cost of building these renewables way down.

So hopefully that brings new investors into the space. which I think will also allow us to do what we're doing, which is think more creatively about what to do with the power on the other side. So that's kind of an interesting discussion because arguably a lot of the tax credits for both wind and solar, I get mixed up. I think there's a production tax credit and then maybe that's for wind. And then there's, is it more front-loaded for solar at the federal level?

Yes. So there's, I guess, tax abatements credits from my unsophisticated seat. And I've seen it argued. I don't know if this is true that that leads to kind of malinvestment, as in wind and solar being plonked down in the middle of nowhere, where it's not really going to reach demand centers because maybe it's, I don't know, in Oklahoma somewhere where there's plenty of wind and sun, and there are no consumers or industrial demand.

Is that the case? I mean, does it lead to production in places where it would require massive investments in transmission for the power to actually be relevant to the grid, to demand centers? I don't think that that past argument is going to hold as much weight going forward. And the reason being there have been such massive developments on, you know, the climate tech front. So if you think about green hydrogen or industries that can now be powered by renewables, you know, historically when we think of standing up power, we think of standing it up for, you know, a local community or a specific use, a university or, you know, an aluminum smelting plant, what have you. There are now far more applications of it.

And so I do think, and I hope that these new dollars are going to also bring the necessary, you know, kind of upgrades of the infrastructure, the transmission lines, et cetera. I think that that's going to be a really wonderful byproduct of this bill. But I also think that we have a lot more uses for it, for that power itself from a large-scale technological perspective, particularly when you can combine renewable power. with these large-scale batteries that are being developed. And so if it's 80 miles from a, you know, densely populated area, 10 years ago, that may have been, actually 80 miles sounds close, but, you know, 10 years ago that may have been less useful. Now, even if it's a little further out, it's very possible to build a factory that can now

be renewably powered. That's a good point. So basically you're saying that there's, from an industrial perspective, more location agnosticism today such that industry can actually adapt to a grid which is not necessarily overlaid on a one-to-one basis on population centers. I think we're starting to see that. And I think you're seeing, you know, very large corporations looking to, you know, move over to more renewables and getting a little bit more creative about where they are being, you know, established. And so I think even look, Bitcoin mining is a perfect example of that. Bitcoin mining.

is here to stay. We don't have to necessarily be downtown, you know, New York City. We can be a little bit further out. Now, as David mentioned, we're trying to, you know, build some of our locations closer to areas that really require the additional power that we are standing up. But I don't think it's a bad thing to be standing up renewable power sources in various locations across the country because there are various applications for that power that maybe didn't exist 10 years ago the last time that there was a lot of criticism about, you know, subsidies for renewable power development. On the actual, on the hydrogen front, this just occurred to me. I read an article recently taking taking the readers through the taxonomy of the

different colors of hydrogen. And it was completely mind-blowing to me. There's like so many different there's like green, blue, brown, black, pink apparently is also one. It was interesting. that there's such a sophisticated taxonomy around how the hydrogen is generated, whether it's a byproduct, whether it's thermal, whether it's renewable, how renewable it is. I also found it kind of horrifying because it made me think of Bitcoin actually. And the fact that a similar such taxonomy might emerge in Bitcoin, I know there's a few large asset managers out there that are trying to impose one for better for worse. Right now we don't really distinguish units of Bitcoin based on how sustainable the electrons were that went into creating it. It's not entirely clear if it's

possible to track that because all the bitcoins get commingled and things like that whenever there's a transaction. But I guess we may be going in that direction. What are your thoughts on that? I mean, is that something that we ought to do? Should we be pursuing at a minimum more transparency in terms of how the bitcoins are being mined? What's your evaluation of the current level of transparency among Bitcoin miners in terms of their generation? I'll take a stab at this one.

My last role before this company was head of ESG and impact investing. And so I had a lot of conversations about disclosures. and all the colors of the rainbow. And I think the question that is most important is, why are we asking? Why should we care? And I think that there are two reasons. Yes, there's the altruistic and the ever-important climate reason. We should know what our carbon footprint is so that we can improve it, account for it,

etc. But more importantly, disclosers, I believe, should be made because it's just a another risk metric. So for an investor, if you wanted to know where we were getting the components for our data centers from, you could want to know that because of the carbon footprint of having to ship them across the ocean, but you may also want to know that because then you have an ability to understand our supply demand, you know, sensitivities. And so it really is just another way to underwrite the risk. So, you know, ACDC has, you know, I don't know if we came up at this phrase. We probably didn't, but we thought we did. You know, carbon transparency is what our goal is.

You know, we're not going to ever make claims of what our, you know, carbon neutrality, carbon negative, et cetera, because everyone's going to have a different way that they're going to evaluate that. But what we are willing to do is be very transparent. But, you know, coming back to my original point, the reason that we think it's important is because for our investment, they should know, you know, what our energy usage is, what our energy optimization of capabilities are, where that energy is coming from, because it's going to affect the bottom line of this company. And yes, it will also affect, you know, climate. But that is, I think, a healthy byproduct of the disclosures. And so trying to come up with, you know, seven different colors to describe Bitcoin mining, I don't know if that's necessarily useful. But I think asking for a disclosure so we can understand, headwinds that company may face is very useful. Yeah, there have been some initiatives from within the industry. I wouldn't say they've been particularly successful in terms of quantifying the sustainability

and the aggregate of Bitcoin miners. And then, of course, there's, I don't know how many, at least I believe over 20 maybe public companies that mine Bitcoin. and so to the extent they're public and this is part of their normal disclosures, that data is being surfaced. But it doesn't seem like we've yet developed as an industry a meaningful standard for how Bitcoin's being generated at teasing apart things like wrecks or offsets from actual sustainable generation.

I just haven't seen much there. But I guess all you can do for now is make sure that your own affairs are adequately transparent. Yeah, and I think having our power sources being behind the meter removes a lot of the assumptions that have to go into your calculations, right? So when you're pulling from the grid, you're now relying on, you know, third-party information of what is the mix and over what time period. And then it's, okay, well, now we have to drill down into for the carbon emitting sources. What is the level of carbon emissions for each of them? We will have to do a component of that, obviously, because we are connected to the grid. With that being said, because we are, you know, striving for 80 to 90% behind the meter,

we'll be able to look directly and say, well, we know exactly where 80% to 90% of it is coming from. And it just removes a lot of the layers of assumptions that go into this calculation. So we are engaging with a lot of those various different counter parties and who are trying to come up with these different ways of evaluating the carbon footprint of Bitcoin. And I think, you know, our model is somewhat attracted to them because we're able to cut through a lot of the numbers. Right. Yeah, that's a great point. When you're pulling from the grid, you can't actually trace the electrons. It's probabilistic. Exactly. Yeah. And it's, you know, there's a certain amount of subjectivity in there. Whereas in your case, a good percentage of the time you can know literally exactly where the power is coming from.

So that's a very good point. Just returning to the battery point, you know, I think we've all seen cost curve declines for batteries as well. Maybe it's hard to say they are economical at scale just yet. what is the kind of status quo in terms of batteries? I know the commodities rally is also complicating things a little bit and the price of EVVs is increasing and so on and there's all these concerns about do we have enough minerals for the required number of batteries? You know, as of 2022, what is the kind of feasibility of kind of utility scale batteries for use on the grid? So currently the batteries that you'll see folks like us utilize are really from an economic feasibility perspective, it's really going to be kind of a two to four hour swing.

That being said, you're seeing a lot of really wonderful developments happening in the space. You know, a shout out to a local Boston company, Form Energy. You know, they are developing really large scale batteries that will grow. greatly improve, you know, our ability to interact with the grid and to really have, you know, kind of 24-hour storage and longer. And so I think that over the next two years, you're going to see some massive, massive developments in the space. And again, thanks to this IRA bill, in part, you are going to see those cost curves come way, way down. So I think it's a really exciting time to be in any kind of climate tech, and particularly for us at the intersection of energy

in climate tech. One thing that I was thinking about when crafting these questions, in terms of if you are proactively locating your operations in places where there is an energy glut because of solar and wind development, I mean, if you look at Texas, for instance, the whole interconnection queue is wind and solar, basically. And obviously, they're correlates. in terms of their generation patterns. And so you end up with kind of mismatch, I guess, between supply and demand, which has to be resolved somehow. You're obviously going to need to supplement it with something like gas.

You'll need to build out some more transmission. Is there an interesting sort of perversity where, as that Bitcoin miner kind of scooping up a lot of this underutilized energy, this maybe not be the case for you because you're kind of more focused on an additionality. But to the extent miners are scooping up strained energy, does that sort of abate the signal, which would otherwise be used to determine where transmission ought to be built? So does that kind of short circuit, that market signal of here, there's tons of negatively priced or zero priced energy here, we should be building transmission.

I haven't even seen this critique of Bitcoin miners, but I figured you'd be able to answer it. It's an interesting question. The way that I would think about that is, ultimately, I believe transmission demand or demand for additional transmission will come from where the power is required, not necessarily where the stranded energy currently exists.

And so if you look at a market like Texas and you see the demand centers, without new transmission, you're not really necessarily going to solve those problems. And so those markets will continue to experience higher power prices and will ultimately will lobby and continue to pressure for new transmission to be developed regardless of what happens in West Texas and the pricing environment there. I agree. And I think that the transmission is the domain of, the utilities. And even when there is very high demand for energy and there is cheaply priced

energy, so here in the Northeast, cheaply priced energy coming out of Quebec, demand for it in Massachusetts, that transmission has to go across Maine. And there are communities within the state that have been very opposed to that transmission. And so there is a lot of politics in addition to economics that go into the development of those transmission lines. And so I don't think that we can kind of underestimate the Herculane effort of these transmission lines. And so I actually think that there's a real opportunity here for any industry, but in this case, us, Bitcoin miners, who are very technologically advanced, who are always looking to reimagine, you know, how their operations run to start working in conjunction with government, in conjunction with utilities,

and help solve some of these transmission issues. So it's interesting. It's very much been a conversation of us versus them. What are you doing to the grid? How are you hurting the grid? How are you taking power? Instead, I think that you actually have an industry that would probably be willing to be very creative if we could partner up in certain instances. And that's what we've seen in developing our own sites is that we can be a partner to the local grid. We're not meant to be, you know, an adversary. Yeah, it is interesting that you mentioned the difficulty in transmission. It's kind of funny. You compare America and China and China has built a massive high voltage transmission network in a relatively short period of time. I think partially because

they have tons of renewables in places like intermonolia, which are just, or even or southwest China with hydro, which are nowhere near demand centers. And that's how you resolve it, I guess, is you build thousands and thousands of miles of transmission. In the U.S., like, it's just very hard. There's nimbism. There's a matter of who's going to pay for it. We have a stronger commitment to property rights, I guess.

If you are a rancher, you don't necessarily want a huge swath of your land. and just cut in a straight line. And, you know, Texas, I had, what is it called Cres, I think, right? The big high voltage project from the West Texas to the sort of triangle down there at Dallas, Fort Worth. And that took a really long time, but it ended up being great investment because there's so much generation out in West Texas and tons of demand. But I think it's only 12 gigawatts. and it's sort of fully accounted for.

So my view of what's going to happen is that generation is going to continue to get cheaper, especially with renewables that are kind of zero marginal cost. There's no fuel inputs there. And T&D is going to get much more expensive over the next decade.

And so from the utilities perspective, having that intermediate buyer that can come to them and scoop up. this access energy is really helpful as far as their economics are concerned. And so I guess that's the role of Bitcoin miners. Well, and the role of Bitcoin miners to the extent that they participate with the grid, as I mentioned before, you know, data centers can be this bidirectional node.

And you see it happening in Europe a lot where instead of just focusing purely on building brand new renewables, they're trying to harness data centers as, you know, a switcher on a line almost and redirecting power to where it's needed at certain points in the day or of the year. And so, you know, interestingly enough, you are seeing Bitcoin miners, particularly in Texas, some Bitcoin miners, starting to play that role almost out of, you know, kind of transmission that we so badly need. Yeah, so I want to talk about demand response. It's an interesting situation. We've got California blackouts, I think. As of yesterday, this episode will probably air in a couple of weeks time, but California was having blackouts yesterday. There's interesting

conversations around electric vehicles. I don't think this is really mature yet, but I know Tesla wants to get there, whereby vehicles themselves can be kind of a store of energy that's exogenous to the grid, which can then maybe be plugged back in. I know you can, with the Ford F-150, I think you can actually charge your house with it. And so, you know, we're kind of transitioning from this like very dumb grid model that's been the case existed in this single configuration for, you know, 100 years or so to a much smarter grid. I know that sounds like a total cliche, but it seems true.

You know, demand response is a word that has a lot of meanings. One is simply just households and industrials. using less energy as there's scarcity. But then there's also very specific programs depending on the ISO, depending on the region, that large industrial consumers can opt into. They've been well, I would say they're relatively sophisticated in Texas in particular, probably because Texas is islanded and needs more of this. What's your level of engagement or planning?

engagement in terms of some of these demand response programs. And what would that actually entail from your end? Yeah. I mean, we absolutely are intending to put demand response into our power strategies. It doesn't mean that we will, you know, you know, do demand response every single day because it just may not be the environment or the pricing kind of model for the next day may not just be conducive to just participate in the demand response program. we will always evaluate demand response as an option.

I think a key distinction between what most Bitcoin miners do with demand response and what ACDC does, though, is that if you think about most Bitcoin miners as a load-only business, where they have an agreement to purchase electricity and then they are now shutting off that set electricity through demand response, ours is actually, if you think about it, a little bit different because we not only are turning off our load, but we're actually providing that physical power that we've now built and directing it back to the grid. Not only are we just kind of turning off what we've purchased, we're actually participating by providing net new electricity to the grid. So I do want to make that distinction. And I think, you know, that's that's the,

that's key versus what we're doing versus some of the other Bitcoin miners out there. Yeah, I see, I see a lot of cynicism around the chest thumping that Bitcoin miners engage in around demand response from the kind of like renewable community because and I kind of see their point that simply buying energy and then curtailing selectively it helps obviously during a scarcity event but it's sort of dubious to the extent it is like genuinely, you know, helping transform the grid. And I guess you could say your pressure and you're buying energy when it's cheaply priced and so that's useful for the utility and then they can use that additional income

to make more investments and sort of grow the scale of the grid. So it's overall good. And, you know, to the extent you're not contributing, grid scarcity events, that's also good. but it's kind of oblique. You know, it's not that easy to really conceptualize how that might be good for the grid. Whereas in your case, the existence of ACDC means that there is more power available to end users, more sustainable power. And you're also not stressing the grid during the scarcity events. In fact, during those events you're redirecting your power out, Bitcoin miners are off and the power is just being directed out towards.

the grid. And so it's clearly a nut improvement. There's just no ambiguity about that. We're taking what I think a lot of Bitcoin miners are striving to do, which is incentivizing new renewables and taking that head on. We're actively baking that into our own business model and catalyzing those new renewables ourselves. And so we're just trying to remove a step of, you know, you're right. To your point, Bitcoin miners are purchasing, you know, power at lower price points during the day, and it should, in theory, you know, provide the incentive for utilities to continue to incentivize new renewable production to come online. Well, we're just putting that onus on ourselves, and we're putting that plan into action. It should come as no surprise that a

Bitcoin mining company that operates and thrives in the decentralized finance world has been focusing on decentralized power, right? I mean, we are, we are standing up our own power. We have full control over our own power source, and yet we are interconnecting into the existing system as well. So it is really interesting when you start seeing some of the parallels in the two spaces, in our model at least. I don't want to be a conduit for critics. I feel like that's a lot of my questions here, but it's just I get asked these questions all the time, so I'm now imposing them to you in turn.

One question I got asked by a journalist recently was it was around some curtailment events. I think miners now basically put out press releases when they curtail, you know, in conjunction with like storms in Texas or something. And a journalist asked me, well, is it fair that miners should be receiving these payments for participating in DR when the grid is under stress? And it was also it was said with indignation. you know, like how dare they be paid to turn off their machines when, you know, power prices are very high for consumers? Is this something that has been posed to you as well? How would you answer that? It's supply and demand. I think at the end of the day, it's all going to come down to the type of contracts that miners have with the utility provider. and whatever that contract says you need to do, you do.

And you have to incentivize someone to be willing to sign that contract. And so is it fair? I mean, that's probably a very hard word to debate. Everyone's, you know, definition of it is different. But at the end of the day, if you need to get people offline, one way to do it is to make it more worth their while, to not draw on that energy. And so if there is a problem with that construct,

then the solution may have to be, make a better contract, make a different contract. I think that that's the only other alternative. But at the end of the day, I think we, look, we're all in the investment world. You know, supply and demand, whether it's raising interest rates or, you know, changing prices, that's what's going to change consumer behavior.

Bitcoin miners or should not be expected to behave any differently than, you know, oil and gas, right? When the price of oil goes up, is it fair that they get compensated to do more? Yes, that's their job. It's kind of how it works. So I've had you on for a while now. So I'll let you go in a second here. One interesting thing that a miner came on my show and said was, you know,

it's not just about the sustainability of your operation. It's actually about, you know, as large consumers of energy and certainly Bitcoin miners. are. I don't know what the current power draw of the network is, maybe 15 gigawatts or something. It's very material. You know, what they do is also evaluate the influence on power prices of local consumers that are, you know, residential in particular. Like, how is there, how are their operations affecting bills that households are paying? And there's this paper about, you know, this nasty academic kind of came up with this thing in upstate New York saying, uh, Bitcoin

miners, you know, cause power prices to rise for local residents in New York. I don't know if that's true or not. I think you can, you know, build a model that says anything, basically. Is this part of the evaluation? And do you, you know, what do you expect the influence to be of your operations on local households, if any, their energy bills? I think for us, because we're specifically behind the meter with our own power and we're putting new power onto that local grid, it should be a net positive for those local communities. So we are not taking a finite amount of power and taking a slice of that pie for ourselves. You know, we are bringing new power. And so that is a really big part of our model is that we want to be good stewards of the grid. We want to be good community partners. And so

that is very unique about our model, is that we are not looking to increase power prices. And if you think about bringing new power, if anything, all else equal, it actually should bring their power prices down. I think we'll leave it there for today. This has been really great. Where should listeners go to learn more about Aspen Creek? We have a new Twitter page. It is ACDC underscore HQ.

We have our LinkedIn page. And then we also have our website, which is acedigital.com. Well, thanks for the time. And yeah, really looking forward to seeing what you do here and hoping that you become, you know, one of the most influential minors. I think the model is great. And thanks for sharing your insights with us today. Thank you so much, Nick. Thank you.