On The Brink with Castle Island - Blake King (Galaxy Digital) on Mining, Transmission, and Curtailment (EP.362)

Episode Date: October 17, 2022

For another episode of the mining miniseries, Nic sits down with Blake King, power markets engineer at Galaxy Digital, for his second OTB appearance. In this episode:  Blake reacts to the White House OSTP report on crypto mining Does mining actually reduce the incentive for utilities to build additional transmission? How transmission building decisions get made How are ERCOT planners taking the price of Bitcoin into account? The merits of proactive transmission construction Why the existence of strong property rights makes transmission much harder to build Can Bitcoin be understood as the electrification of gold? Is there really 17-25 GW worth of Bitcoin miners in the process of connecting to the Texas grid? How should we think about interconnection and load queues Why would ERCOT exaggerate the planned scale of Bitcoin mining in Texas? Do miners using renewables "not count" because they displace other consumers of renewable energy? Why Blake expects the $/MWh revenue for Bitcoin to continue to trend down over time Are Bitcoin miners forcing grids into grid scarcity events? Economic curtailment versus formal demand response Are Bitcoiners overestimating the importance of demand response for miners? Content mentioned in this episode: Bitcoin Mining and the Grid, Part I and Part II Part I of Blake King on the show: OTB 330 White House OSTP report on Bitcoin Mining Intro and outro: Daniel Allan's Collage #344

Hello and welcome back to On the Brink. This is the mining mini series. We're sitting down with Blake King, who is an engineer at Galaxy Digital, focusing on Bitcoin mining for his second conversation with us. In the first one, we covered Bitcoin miners' suitability for demand response. In this one, we look at some of the claims made in the recent White House Office and Science Technology Policy Report about Bitcoin mining, and we give Blake's expert eye a look at some of their claims. claims, especially relating to the interplay of Bitcoin mining and transmission. An incredibly complex topic, Blake, as always, does a great job breaking it down. Let's dive right into this one. This is the mining miniseries. Welcome back. I'm sitting here with Blake King. Thank you for joining us.

Once again. Thanks for having me, Nick. Glad to be here. You know, not a lot of people get the honor of being a repeat guest on the show. So, I mean, you're not the only one, but it's just a very select bunch. Well, I'll take the compliment where I get it. And we had so much to talk about last time. And the time really breezes past whenever we talk about power.

So, you know, I think I pretty much set myself up to be a repeat guest on the first edition. Yeah, it's also my fault for not booking a two-hour slot. But, yeah, I mean, I wanted to cover both of those great posts that you'd made. And we got part of the way through one. So anyway, I want to first cover this White House report, the office. of science and technology policy, the White House OSTP. They created this report called the climate and energy implications of crypto assets in the United States. I wrote some feedback, but I would love to hear your thoughts on a few of their specific claims, if that's okay.

Yep, sure, sounds good. I mean, this has been a hot topic on Twitter. We've seen a bunch of people writing responses. You know, in some aspect, when I read it, it's like some level of cringe because there's some arguments that have been made and are tired and have been tried and argued already. So at some point, it feels like we're spinning our wheels here in the industry trying to answer these questions or we're answering questions that, you know, I've been asked and answered many times. But either way, it's happy to get on and just kind of riff with you naturally about the different topics on it. Yeah, so actually, you reading the report, did you feel that it was written by power professionals or did it seem like it was written by like people that are just like climate types?

You know what I mean? Well, that's a tough question to answer, Nick, because there aren't really that many power professionals that aren't climate, climate hawks that exist in these spaces. Like, especially when you're reading like a White House report, there's almost, there's like a certainty that it's going to come from the climate angle. You know, the Biden administration has a pretty explicit climate agenda, climate goal. So it would be pretty tough to see something that's written purely from a power stance that doesn't have at least an underlying assumption or narrative towards climate change.

In your past life working on grids and in power, is that commingled with, you know, nuts or their agendas or are generally are people just focused on like making the grid work? and delivering power. That's tough. It depends on who you are. Like if you are working, so just to be explicit on my background for the listeners. So I worked at Urquhart, which, you know, the famous grid operator that not many people would have identified by name a few years ago, but now probably most people can identify.

So I worked in the kind of the planning department, modeling planning. And there, there was always an underlying assumption that climate change is happening. and that the renewable transition is occurring, right? But ERCOT is primarily concerned with operating the grid. And they're trying to do so within the realms of, you know, what's happening around them. You know, there's some explicit, like, differentiation between ERCOT's scope, like, what can ERCOD do, what they can't do, right? And because ERCOT is a deregulated market, they can't really put out an RFP for new generation,

right? So if you get a regulated grid like TVA or FPL, right, like they can put out an RFP that says, hey, we need this many megawatts of this resource type or that resource type to meet our goals. Ercot can't really do that. They're more reactionary, right? Like they see what the free market is putting into their system. And then they do some resource adequacy assumptions based on that. You know, they look out.

They say, okay, here's how much generation is planned. you know, like is that enough to meet? If it's not enough to meet, then maybe we ask for more. But really, there's like this reliance on price signals to incentivize new generation coming online. So in that respect, you know, there's an underlying assumption, obviously, in the industry that the energy transition is happening and that we have to do something to, you know, keep the grid operable during it. But then, so that was the ERCOT life in the renewable developer life. So I worked at renewable energy systems, global renewable developer. You know, they're an EPC shop as well, basically building and developing utility scale, solar, wind, storage.

Everyone is a climate hawk at these shops. I mean, everyone believes that climate change is, you know, happening and that, you know, if we don't make, you know, X-defined amount of change over the next few years that were doomed. I mean, that might be a little bit hyperbolic. But that's at least like the narrative that it feels like to work at these shops. In Erkot, even though they can't mandate new generation of a certain kind coming in, nevertheless, Erkot still has the most wind of any major. Is that right by percentage of any ASO or RTO?

I mean, there's certainly a lot of wind there. I don't know offhand if they have the most by percentage, but that feels right. And there's some reasons for that. There was the big CRES project, right, where ERCAD did a proactive transmission build out through West Texas because there's a lot of wind energy available out there. That was basically kind of a let's incent to these wind. And I know this kind of runs against what I just said, but they basically did a proactive transmission build out and a bunch of wind developers flocked to the area.

And again, this is kind of the other side of that. no RFP process, right, where they don't need to put out an RFP so people can just build generation when they want, right? And so there was kind of like a gold rush of wind development out in West Texas. And this was like probably 10 years ago. This gets into one of our questions about how transmission is planned and determined. Right. I mean, this is, this was basically my number one question. So there is this quote in the report. Let me find it. The report's not friendly to Bitcoin, to be honest. They don't like Bitcoin very much.

Just got to say that. So they say, basically they imply that miners using renewables that, you know, might be curtailed or not be fully monetized, Bitcoin miners using renewables basically inhibits the signal that would prompt the build out of long-range transmission. So here's the quote. Using carteled electricity can provide additional revenue to renewables, developers, and incentivize the construction of additional renewable energy capacity. All right, this is good so far. However, it can also reduce the financial incentives to

construct transmission from these renewables to existing users. And then there's also a note on storage. So is that true? I mean, would Bitcoin miners plonking themselves down in West Texas mean that Ercot is all of a sudden sort of price signal blind and no longer has an appetite to build transmission. In a way. And I touch on this on part two. So in the article, in part two, I give some kind of steel manning at the end of what we should do to make Bitcoin a better grid resource. And one of the underlying assumptions that exists here is that the Bitcoin load and the demand is inelastic,

which is a standard assumption in electricity markets. you assume that the demand is going to be whatever the demand is and that the generation needs to match that. So you have an elastic supply and elastic demand. Now, with the flexibility of Bitcoin miners and when people like you and I discuss them, we like to steal man and we like to say, well, Bitcoin mining is a purely elastic. Like we'll turn off whenever the real-time price signal is such that we should. And then we build our arguments based off of that. Now, the reality is that that's not how all Bitcoin mining loads act today. And there is no real incentive or market rule where they have to behave that way.

Like, you might have a Bitcoin mine that is running machines that break even at $100. There's no market rule that says that you have to turn off at that point, right? You could have a hedge in place where you continue running indefinitely. Like, it doesn't matter. And so in that way, way the Bitcoin miners that are going over there in West Texas are raising the prices over there. And whenever they raise the price, that inhibits what would be a price signal to build new transmission capacity to effectively bring cheaper electricity eastward.

Because the signal is zero or negative or low pricing. The signal, so the signal is that if we had more transmission capacity, we would lower the cost of operating the system. So the idea is that there's all this cheap electricity over in West Texas. There's not enough transmission capacity to bring it over. And so because we don't have enough transmission capacity, we now have to use more expensive generation in the east to serve the load. So if we spent money on expanding transmission capacity, we might do a fixed cost on that transmission, but pay it back with all the cheaper electricity coming from the West. So the idea is if we raise prices in the West, well, then we're no longer saving money by

building new transmission because that power is being eaten up. So it's kind of one of those things where, you know, the wind and solar developers that put it out in West Texas are going to have to suffer a little bit of low prices until the transmission comes online to then raise their prices by allowing that was served demand in the East. So in this aspect, they would hurt. the price signal to build new transmission. But this is a pretty narrow, a pretty narrow understanding of transmission planning.

Right. Like when I talk to the ERCOP modelers, they're putting Bitcoin break-even prices into their model. Really? So they're saying, so they're saying, oh, yes, Bitcoin load is over there. But when the price goes to 100, Bitcoin's going away. Right. So we're still going to need to serve the demand in the east with all the wind in the west when prices are over 100. So at that point, that signal still exists, right? That load drops away,

which is, which is the way that if you, if you're in my assumption on Bitcoin being like an elastic demand, this is how we would want it to be modeled, right? Like, we would want the Bitcoin to be modeled when the price signal is there, take it out when the price signal isn't there. And then you still have that excess energy in the West and no transmission capacity. So the Aircott planners are sufficiently sophisticated around Bitcoin. that they understand these dynamics, the more nuanced side. They do. There isn't really a good structure yet, like compared to the generation side, right?

Like they've been doing this with generators for decades, right? So they pretty much know how to do this on the generation side, how to economically propose new transmission, right? They know how to do that. With the Bitcoin side, it's very early days, you know, and with all of the, the key, Q numbers, the load generation, the load Q numbers that you also have on the agenda for today. It makes their job

much harder, right? Because they've got this model of the system and they're now having to put in 17 gigawatts of Bitcoin loads. So like there's just so much noise in the model. Right. Like when you're running a power flow and you've got 17 gigawatts of load all over the place,

like removing half of that can drastically change your results. It can change what transmission lines are feasible, what are infeasible and things like that. So that's just another noisy variable that they have to deal with at this point to try and make sufficient analysis of what they should do about transmission. So my like very much like layperson reaction to this was based on my understanding, you know, I feel like there's going to be, assuming as more renewables built oftentimes further from population centers.

we'll just need a lot more transmission in the future. And that'll be a more important part of grid planning is just building out more of this sort of connective tissue. And I would look to like China's example there. Not that I look to China for much, but they built this serious both DC and AC, I think, sort of like ultra-high voltage long-range transmission network linking up, you know, solar and wind resources in the north and then hydro resources in the south and linking them to the industrial hotspots. So, you know, it seems to me that if we have tons and tons of wind and solar coming online in less populated areas, we're just going to need UDLs more

transmission in the U.S. anyway. And so I guess my question is, is do we need these price signals as much? Or is it just a matter of like, yeah, we just got a green light transmission to go crazy on the transmission front because we know we're going to need it. There's a famous chicken in the egg. You know, it's funny because you can logic your way into certain issues that are just hot button topics in a very niche industry. And this is one of them.

And there's a, it's called the chicken and the egg problem with transmission, which is historically, whenever someone went to go develop a new fossil plant, it would take years. And so the idea is you could kind of run the development of the plant with the development of the transmission and kind of meet them together at the same time. Now you can develop a wind or a solar farm in, you know, two years or less, which is much crazier timeline than any sort of transmission development, right of way, easements, certificate of public necessity, actually building the structures. And so there's really two prongs that people have been doing here, one of which is to try

and cite these new projects as much as possible on the existing infrastructure. So that's whatever existing transmission lines there are, site there, basically keep really close tabs on any fossil fuel retirements. So if a coal plant is up for retirement in 2030, you've got every development shop in the country like targeting that area, like looking, okay, like where can we build around this fossil plant? Because when they go offline, they're freeing up capacity. You know, like maybe we can even repurpose their substation. Maybe we can build actually like right there. And so, you know, when I was working in the development world, it was basically like the grid was picked clean.

Right. like you would you would find you would run your analysis on the models you would say okay where is their capacity where can I inject enough energy without being curtailed such that my pPA prices are going to be like acceptable for people right and anytime you would find a good spot on the grid you would look at the irkot interconnection queue and there would be like three or four other projects right ahead of you that just like came upon the same thing right so this is so then the other alternative there is, well, that we could proactively build transmission. And this is what we were alluding to earlier with the CRES project. Urquhart foresaw this issue. They said, well, there's a bunch of

wind out here in West Texas. You know, we got some in rel databases that say that this is like, you know, the third windiest place in the country. Maybe we should build a nice big 345KB loop out there and attract all these wind developers. And you also see that in other areas of the country. Like right now in Colorado, they have the 80 by 30 task force, which I think is the 80% reduction in greenhouse gas emissions by 2030. And they have been proposing a proactive transmission loop that goes down through like southeast Colorado around like really windy and sunny areas. And this is the same idea.

The same idea is to attract new renewable development by pre-building this transmission line. And, you know, sure enough, halfway through the task. task force you'll you'll already find developers that are buying up land in these areas as kind of like a speculative gesture that's either to either to flip the land or to develop something themselves so yeah I mean the the story hasn't really been written on that but it is a chicken and egg problem and you know the big risk here is stranded transmission assets which I think has happened in Canada a couple times where you you proactively build this huge transmission really expensive transmission line that it's rate-based and then they don't come, right?

And then it's like, okay, we've got all this excess capacity, right? What do we do here? Wow. So in the CRES example, it took like the better part of a decade to build it, right? Yep. I mean, it was expensive, but is the view that that was totally worthy investment in hindsight? It was over budget. Well, what's the saying over budget and behind schedule?

Behind schedule, yeah, exactly. Yeah, I'm not sure. I haven't done any sort of analysis on the economic benefit of CRES versus what the expected goal was. I think generally it's seen as a success because of how much wind is in West Texas. Those claims to success have kind of been qualified a little bit by curtailment and West Texas generic transmission constraints, like just facets of reality that come to play whenever you build, you know, 30 gigawatts of nameplate wind out in West Texas. this, you know, like you can build enough capacity, but that doesn't necessarily mean that you can get it all the way to where it needs to go. So the economic realities of it and maybe the need to build more transmission capacity out there to maybe relieve some of that curtailment is still kind of up for debate when it comes to the actual economics and what the rate, what the rate payers getting at the end of the day. But I guess the idea is that society has got like a certain amount of investment. It's willing and able to make into energy.

and you have to split that into generation and transmission distribution I guess there's probably other things you've to spend the money on too but those are the main things right and it can't be like just one or the other like there has to be a balance because if you just put it into generation

you end up with under monetized projects but if you put too much in transmission you end up with stranded transmission yeah and the free market the free market is supposed to solve some of these issues. Like in ERCOT, the deregulation has put the risk onto the private generation developers, right? Like these generation sites are not rate-based. These are, this is private money going into building these sites, and the transmission is rate-based. So this is why ERCOT has the

task of qualifying different economic build-out, reliability build-out of transmission. And you compare that with a place like FPL where they have kind of a rate-based, for everything, right? So they, you know, they use ratepayer dollars to pay for generation and transmission. So the idea of the deregulation was kind of to let the free market kind of work and have competitive generation be more efficient. And, you know, I think the jury is still out on whether or not deregulation was actually like in the end better for the consumer. Wow. I mean, this, the, whenever I talk about energy, I just, it, it feels like there's no generalizations you can make because there's so many different models. There are, but I have to

hold back like so many asterisks. And this is what makes it difficult to talk on Twitter is because people can make a generalization. I can accept that it's true, but still feel like I need to do like, you know, nine paragraphs to like be more precise about what exactly they're saying and what can go wrong with how they're saying it. And so I've had to kind of pull back from doing that because I found it wasn't very useful. So, but on the on the price signal, actually one note on transmission first. it's difficult to build transmission, right? Like, it's not a trivial thing. I mean, there's materials and things like that,

but it's also eminent domain, like getting the land. Like, that part is hard also, right? Takes years. Takes years. And you're into a space where it's over a million dollars a mile to build any significant high voltage transmission. And like you said, you're going through people's properties. So you have to buy that land.

And if they don't want to sell it to you, then there's a whole certificate of public necessity thing that you've got to go through that takes years. You still have to buy the land. You still have to build it. You have to do all the permitting. You have to do all the endangered species stuff. I mean, it's no trivial ask to build hundreds of miles of transmission. Yeah, I mean, a lot of loan thousands, right?

So I think it makes me think of the difference between the U.S. and China where they can just build it over there. and you know like the property the notion of having property rights and the rule of law is a constraint on your ability to build transmission which is incredible to think about so i mean does that like actually impair our ability to make this like renewable transition where we are relying on more remote wind solar assets it certainly makes it more difficult and it's it's easily an aspect of this renewable transition that gets brushed over whenever people talk about net zero and things in that nature you know i hear people saying well yeah we'll just build more transmission and uh turns out it's super hard and it takes forever yeah there's pine there's pine the sky ideas that people like to lean on you know like maybe we should just have

transmission follow railroads or you know things of that nature but they they have their own can of worms that they open. I mean, it's just a really tough problem to try and completely change how the grid operates and do it in a very short time because you think the consequences could be like population ending, right? So does that imply that we need to maybe rethink the actual model of grid from like, you know, delivering power from the periphery to the core to maybe we push load out to the periphery and, you know, maybe add. we tend to spend more energy now on location agnostic use cases, like not just Bitcoin, but is there, is there, I'm not active in the energy space at all. Is there even any thoughts

of moving to a more location agnostic model in terms of our consumption patterns? Like, obviously hydrogen is part of that. But is that part of the discussion? Well, you can't really force people to live in certain places, right? You can't really go build a city where people don't want to live. And this comes back to, you know, the paradigm that we were discussing earlier, where it's, it's, the historical model is that your demand is inelastic. And that includes like location inelastic, right? So the purpose of grid operators and planners is to build to the load.

Now, just as you mentioned, there is big talk now on co-located hydrogen, co-located Bitcoin, things of that nature that kind of help the economics of these sites are out there and kind of de-risk, de-risk their, development, right? But that still doesn't solve the problem of, you know, we need to plan the grid such that whenever the peak demand happens, we need to have enough capacity and enough energy to solve that demand, right? So we can't, we can't just have this, this islanded solar and wind that's, you know, connected to the main portion of the grid through like half its capacity, right? Like, that doesn't work. We're not, we're not actually solving the peak demand of

the system that way. And so you're still kind of left with that problem. And it occurs to me that in a sense, like electrifying vehicles actually, correct me on this, decreases the location agnosticism of your energy network, given that like gasoline kind of like was, you know, could be like scattered anywhere, whereas like EVs you charge them at home. Or is it still kind of like roughly the same, would you say? Well, that's interesting. Well, I haven't really thought about the location agnostic dimension of the EV charging. Like my EV charging thesis pretty much stops at the amount of distribution infrastructure changes

that are going to have to take place if we start adding multiple kilowatt hours at the same time when people get home from work. You know, there's people that are spending their entire careers right now trying to solve this issue. That's the worst time, right? That's the worst time. Yeah. And there's, you know, there's some, like I said, there's a solution for every. in the space. Now, whether or not it's feasible is a different story, but people are saying,

oh, well, just, you know, charge your car when you get to work, you know, like, what are you doing at work with your car anyways? You might as well have, like, a little charging port to do it. And then we do, like, rooftop stuff. Like, everything we can go down its own, like, due diligence whole for, you know, multiple hours on discussing it. But, yeah, the EV problem is one thing. But you electrify everything is another question. I mean, that's a, that's a thing that I want to bring up any time someone makes a reference to Bitcoin's energy use. And it's like, well, I mean, we're using electricity for a lot of other things, or that's the goal at least. So we're going to have to solve this at one point or another. Yeah. I mean, frankly, in my view,

Bitcoin is the electrification of gold as a storage of value asset. Like, so how do you mine gold? You use a big gigantic truck that's the size of like 10 school buses. And it drives around using diesel fuel and it takes ore and it whatever there's trucks involved i don't know how it works but like gold can't really be gold mining at least can't really be electrified right i don't think you can really electrify those trucks or any of that infrastructure um bitcoin basically does many the same things as gold similar purpose but it's fully digital so i this is the thing that confuses me, Bitcoin is already fully electrified. That's where we want to go. That we want electrify everything, right? And the electrify everything agenda has this increasing generation

by whatever, three to four X. I don't know, some multiple. So if we're so confident we're going to do that, why would we be worried about an already electrified, you know, whatever it is, 0.5% of consumption? Yeah, I love this analogy. And I've used this occasionally when talking to climate hawks about it's the electrification of money and and you know what we really need to do if you're concerned about this is do a model of you know how much bitcoin adoption reduces gold consumption you know gold demand pricing signals and so that that would be an interesting model to do and I think it would it would have you know some interest for people in the space I don't know if it would actually change any hearts and minds but it would be interesting to see yeah I mean you could see

you could say like look the world has a budget for hard money assets and there's Bitcoin, there's gold, and maybe something else in there. Gold, by the way, consumes more energy in its extraction refining than Bitcoin does. I don't even think it's close. And you could say, well, yeah, like one takes away from the other. So all we're doing is actually a substitution. But for that to work, people have to like acknowledge that Bitcoin has similar properties to gold. And I guess like Bitcoin critics are not ready to do that.

Okay, so let's see. More questions on this report. Okay, so here's an interesting one. All right, we have to cover this. The OSTP report claims that there's 17 gigawatts of crypto facilities that are in the process of connecting to the grid. They cite some other numbers. They say this is 5 to 6 gigawatts of new demand in the next 12 to 15 month. They say they may see another 25 gigawatts of the next decade.

I think generally speaking, the Bitcoin miner community, knows that this isn't necessarily true or at least it needs more context. What are your thoughts on this? Well, I obviously agree with the Bitcoin community there. I think the thing to accept here and the thing to give them is that it is it is prudent for Urquat to assume that all of that's coming online, right? It does, it's prudent for Urquat to, you know, take the threat seriously because their job is to plan for the grid, right? So if people are coming online, they're saying they're coming online, you know, they can't, at this stage, they can't turn them down, right?

That has nothing to do with if the load is real or not. That's just their scope. Their scope is if you're a load and you want to come online, we have to open the doors for you. And they have to do so with regards to reliability, right? So this is what Ercott is doing right now. they're plugging these loads into the model, right? Maybe they have a break-even price where they turn the loads off or maybe they don't. But at some point, you can say, hey, we can't serve you reliably.

So the best analogy here is if you plug a Bitcoin mine onto a 100 megawatt transmission line, right? And you want 300 megawatts of capacity. it's not possible right like we can't we can't get you that you know so what they're saying what happens who shuts you down in that situation the utility or orcott what do you mean like who who tells you that your request is invalid yeah so this is another each each question that you ask has a whole paragraph explanation but but historically the transmission operator has been the one that has kind of handled this process right now recently urcott has stepped in from kind of of a central planning process and said, hey, we've got every single transmission planning group

coming to us saying they've got gigawatts of requests and every transmission company has their own process and their own scope. So like we're going to need to kind of see this from a holistic point of view. So right now, Urquot is, I believe, don't quote me on this, but I believe Urquot is the one that is running the actual interconnection study and saying, you want 300 megawatts, best we can give you is 100 megawatts for now because we can't reliably serve anything over that, and you're going to have to wait for transmission upgrades. So this is ERCOT scope at this point. So these requests, the 17 to 25 gigawatts, I mean, how like real are those?

Is there financial security attached? So let me give some context on how this works on the generation side. So on the generation side, you can submit an initial request to ERCOT for something like a couple thousand dollars maybe like two thousand dollars you then get onto their worksheet that says that you've submitted a request now this worksheet right now for ercot says that there's 100 gigawatts of solar coming online in the queue right now once you are in this it's called a screening study and that's within the next few years right yeah i can't i've got the worksheet open but it's it's public information if people want to look at this right

That always shocked me looking at the queue because it's just like an indescribable amount of solar when it's huge. And the entire point is to get in, get the process started, let Urquot know that you're there and also to let people around you know that you're there. Right. Like if you put 500 megawatts into the queue at this certain location, all your competitors that are looking around that area now know that you know about that area. Right.

Now, they don't know if you've got a land lease signed. You know, they don't know how far along you are. but it's kind of like a game of chicken at this point. You're jumping in. So you spend a couple months and then you pay for something called like a full interconnect study. This is more expensive. This is more in the range of like $100,000.

Now this, you know, levels you up to like one more level of seriousness, right? Again, all your competitors know that you're there, you know, things of that nature. You do all those studies. Then you do something called sign an interconnection agreement. And whenever you sign the agreement, you actually securitize all of the transmission facilities that are needed to interconnect you. So this is like a new substation. Upgrades to the existing infrastructure be like protection equipment, things like that. Usually something like 10 million to 20 million bucks, you have to post security for it.

Reason being, you know, if you cancel your project, right, the transmission entity doesn't want to be left holding the bag. So they basically take a deposit from you. Okay. At that point, whenever you've signed the IA, that's when you are considered real in Urquhart's eyes in terms of modeling, right? In terms of they're not putting you in the model. They're considering you real. Now, for everyone else that's looking at these models, they might include those earlier stage projects as like a sensitivity case, right? Like, this is the grid for sure. But, you know, I want to know what happens if all these other people come online too. Now, let's go back to the load side. The load side right now, basically...

Just on the generation, like, of that 100 gigawatts of solar in the queue, how much of it do you expect to become, quote, and quote, real to make to that third step? Maybe 25%. That's actually more than I expected, yeah. Yeah, there's a PowerPoint that a guy named Dan Mantana puts out, Maintana. Sorry if I'm butchering your last name. But he's in the resource adequacy group at Urquette.

He puts out a PowerPoint that basically does this because he's in the resource adequacy group, right? They want to know how much of this is real, right? It doesn't do Urquod any benefit to not have, you know, line of sight on how much of this is actually going to get built. So they do an analysis of this every year and they put it out. And I think it was recently shown that got the numbers right here. So all projects, success rate is about 25.

solar it's 20% wind it's 29%. So everything is down there below 30% Except for biomass which is out of 100% because there was only one project. Yeah, because really the queue is all wind solar and batteries right now. Effectively there's a few natural gas plants. So if you look at the queue and you use those numbers, I'm being very naive in doing that but then you can basically predict over the next few years what generation is going to come online. Exactly.

that's and that's what resource adequacy people do now they take a really fine sharpened pencil to that and they do a bunch of assumptions like where it's going to go right like they basically break it up by zone because this all goes to transmission planning right if you expect there to be more generation here well then we can lower the cost of the system by upgrading this transmission line but anyways but the general idea is that the full queue right you they basically whittle that down by generation by like the amount of money that you have, you know, on the table. When you, when you submit that initial request, you also don't have to prove site control. So you don't even have to prove that you have a lease on the land.

You can just submit the request. Whenever you do the full interconnect, you have to actually show that you own the land or you have a lease, right? So there's like different levels of, of transparency here that you show Urquat. You know, this is what I'm doing. Now on the load side, this entire. process has before now been with each transmission company differently. So each transmission company has had their own process and they've just kind of let Urquot know. And they've put them in the

model like at separate times, you know, different things going on. It's just all over the place. And that's because they haven't really had an influx of load like this and it was manageable at that stage. So now when Ercott comes out and they say 33 gigawatts, that's pretty much that first initial number. That's people, and I'll tell you what that includes, that includes Bitcoin mining companies that obviously have the money to spend, they've got the land, they're putting in the request. It includes developers, so people like land developers that are speculatively buying land close to substations and hoping to flip it to the people in party A. It includes Bitcoin miners that are just speculatively putting in requests because they,

they can, right? Like if you're a Bitcoin miner and it costs you $2,000 to get in line and submit a one gigawatt request, then why not? Why not get in line, submit a one gigawatt request? Maybe Urquette cuts you down to 600 megawatts. But, you know, I mean, you're in line now. And now because you have an interconnection position, that's worth a lot of money. So you can either take that 600 megawatts down yourself or you can flip it to people in group B or people in group A. Right. So there's this whole new commodity now of speculative interconnection requests that is formed. And renewable developers have this problem as well. But this is why it's so frustrating to see these numbers touted as real. It's because, man, do you know how much money it costs to build a one gigawatt Bitcoin mine? You know, like there's only nine gigawatts of Bitcoin mining in the world right now. You're talking about building a one gigawatt Bitcoin mine. I mean, that's. you know, a billion dollars. Like, like, you know, that's, that's not possible. And the fact that you can submit a request for maybe a couple thousand dollars and get in line and say you're a gigawatt,

just makes these numbers, you know, wholly untrue. And so that's what's so frustrating for people like me that are trying to actually give a good steel man to Urquhart and have Urquhart come back and say, well, you know, yeah, you're probably right. But, you know, from our perspective, what are we supposed to do? And, and that's true. I mean, they can put up. RFIs and ask if they're real or not, but there's no real structure or process in place right now for them to say, okay, you've submitted 2000. Now when it gets to this stage, we'll ask you for more money and if you're serious. That process isn't set up yet. It's in the works. They're working on that process. But as it stands now, those headline numbers are just out there into the world.

Yeah, so I looked at the source really and a lot of it's tracing the, is Brad Jones still the interim CEO? Is there a new one? the interim CEO but Urcott just put a new CEO in place I can't remember his name I think he was from a utility up in the Midwest okay well so I think Brad Jones made those claims to Bloomberg and then the White House got it from there but why would Urcott you know exaggerate the you know the likelihood of Bitcoin miners to be consuming tons and tons of load like what's in it for them why not just be realistic and be like yeah you know qualified

the numbers at least. Well, what is the downside to them taking a more conservative approach? Right? The downside, there is no downside. The Bitcoin miners obviously want a cleaner number because that can probably exacerbate their interconnection. But for Urquhart, being more conservative is always in their planning, right? Like they would rather plan for the bigger number, slow down the process, right?

like drag the process out rather than try and get more clean numbers and push everyone through. There's also legitimately no process for them to follow right now. Like ERCOT has procedures and processes that they must follow protocols, if you will, things of that nature. And there's just nothing set up right now to filter load interconnections. Load interconnections have always been pretty cut and dry. Like someone wants to come online, right? Like they do the request.

It takes them a while, you know, to build their stuff. And so now you've got this speculative boom, and there's no process to handle that. And Urquot doesn't really have, you know, the scope to tell people no or to tell people yes. Like Urquot actually, just to put it in perspective, right? Urquot can't come out tomorrow and charge people $100,000 a megawatt. They simply can't do it. Other operators, like in Colorado or something like that, they can do that. they can institute a Q fee where it costs you 10,000, 50,000, like something that's like a little bit

punitive to force you to put money at risk, right? So if you're actually serious, you know, if you're willing to build a one gigawatt project for a billion dollars, you'd probably be willing to put $10,000 a megawatt down at this stage. Urquhart doesn't have the scope to do that. They would have to do like physical changes in their procedures and protocols to be able to do that. So it's half and half. It's half like conservative. posturing for the sake of operating the grid reliably and half they literally just can't make the changes that we think would be beneficial for them to make it's so funny always how heterogeneous these these grid operators are in terms of their mandates it's frustrating for people that work in the industry

because you basically get you know pigeonholed into one grid that you're a subject matter expert in and as soon as you try and put on a different hat it's like whoa i'm gonna have to go back to the basics here. Yeah, I'm nothing even close to an expert, but Urquod is the one that I learn about the most, I think, because the people that I talk to know about Urquat, and so I guess I should be looking into the FPL grid. I don't know. I think it's much simpler. Maybe Florida will become the heartland of Bitcoin mining, and then we'll all be talking about it's possible. I have some more, I have more claims from the OSTP document that we have to go through, but, you know, they're all interesting. So here's a weird one that I really need you to address because I didn't know how to

address it. So basically they say that miners using renewables, they're kind of forcing other load centers to use thermal generation. They're kind of displacing. They're displacing the load. And so if you're using the renewable, it doesn't count because someone else is now forced to use coal or something. They call this leakage, which is a horrible. word. Can they just call it something else? I don't know. So let me, here's the quote. When a crypto asset mine purchases electricity from existing renewables, it displaces the GHG emissions in the near term shifting users of renewable sources to fossil sources. This is because coal and natural gas often supply generation for each additional unit of electricity demand of the United

States. As the amount of renewable sources is solid constant, but electricity demand increases, additional fossil power will likely be dispatched. How realistic of a model is this that they're positing here? Well, the issue with this is that realistically, their claims, like what they're actually stating is true, right? The problem that I see is the philosophy behind what they're stating. And Troy Cross does a good job, you know, kind of explaining this in philosophical terms, right? but they're basically giving Bitcoin like a second tier status as a new load, right,

which one can qualify in saying, well, yes, the amount of gigawatts that is coming online, you know, denote its special attention, right? This isn't a new load that's coming online with like, you know, one to 500 megawatts a year. This is gigawatts coming online. And so it deserves like special attention. But the general philosophy is pretty, male-thusian in a way. Specifically, like, it's, you're talking about, you know, one, we want you to be cleaner,

but even if you do use clean energy, you're actually displacing other people from using it. So there's actually no way for you to meet our demands and our needs. And you can say the same thing about, you know, Facebook, TikTok, Lulu, Lemon. I mean, if you look at the past 10 years of all these different companies that are net zero, right, what they're really doing is funding PPAs for these renewable projects, taking the renewable energy credits, and like netting the renewable energy credits out with their annual energy yield. I mean, arguably they're doing less than Bitcoin miners that are sustainable in their mission where Bitcoin miners can actually, in many cases, prove that the electrons they're using

would be like low carbon electrons. We're opening up a can of worms here, but like the, the, the, the, the, the, the, the, The idea is that if you lay claim to all the future renewable energy credits, right? Like if the site is curtailed, then you don't get the renewable energy credits. If they are not curtailed, then you do. So you're actually taking a renewable energy credit that is theoretically displacing a fossil unit that would have been turned on had this site not existed before. Right. So the philosophy of you're adding load to the system.

So you're potentially undoing the addition of this megawatt hour of renewable energy. I mean, that's true. But that's also true for all the Californians that are moving from California to Texas. It's true for any other new load that's coming online. It's true for any electrification, right? Like every EV that you're coming online is adding demand to the system. According to this philosophy, every EV is coal-powered because it's powered with the worst, incremental thermal generation.

Well, yeah, but then they get out of that by saying that, yeah, but you're removing the gasoline, right, from the picture. So there's like a net. They can do that math, right? They do that math. And they do that math with any sort of electrification issue. But the question is you're now swapping, you're now swapping fossil for fossils. So why don't we just work together to develop more generation generally? Like, why does the philosophy have to take this punitive Malthusian like stance specifically with Bitcoin, but with no other?

loads like why don't we get rid of the dryers it's just like you know it's out absurdum like we could we could talk about this from a million different ways and it doesn't really make sense but the one that you're saying like the facts that they're saying is true can't debate those right under the premises they've laid out I mean I guess like in the context of like the electrification of everything and tripling generation or whatever you would want more benign buyers of power that can target renewables like that is a good thing to have in that more expansive context yeah you're going to have to pay for the new generation somehow right like you're you're going to have to pay for the new generation somehow and bitcoin can provide a 24 hour price signal that it wants power right like it wants power

all the time like you don't have to do some sort of shape analysis where the residential demand peaks at these hours and your solar profile is like this or your wind profiles like this Like, no, just add Bitcoin 24-7 demand draw. And the real linchpin in all of this, and as part of some people's thesis, is that, you know, the Bitcoin mining rewards is going to continue to trend lower and lower. Like lower and lower such that, you know, right now the Bitcoin rate even revenue. Exactly. Right now, yeah, on a dollar per megawatt hour basis, I should, I should say.

So right now, Bitcoin revenue is like, we're not going to scare people on this show. Yeah, yeah. The coin is down only. Yeah, yeah, right. Well, no, the Bitcoin price, yeah, exactly. And this is an analogy that I give to the climate hawks on Twitter, right? The climate people like the Sierra Club guy that basically says that Bitcoin is part of the problem here. I say right now the Bitcoin break-even revenue for a new machine is what, $120 a megawatt hour?

So having takes that down to 60, considering like the big. Bitcoin price stays constant, right? And that happens every four years. So if the Bitcoin price is constant, no new, no new machines come online. You're looking at $30 per megawatt hour for a top tier machine in eight years, right? That is way lower than any wholesale retail electric price signal right now. So that would only work if you use like wholesale from the source power or otherwise wasted energy. the only way that that doesn't work is if Bitcoin price skyrockets.

So like your your thesis, your anti-Bitcoin thesis basically bakes in a 500K per coin Bitcoin price, which is possible. Like I'm not going to debate you that that's possible, but do you accept that? And if you don't accept that, then you should maybe revisit your logic on the game theory of what we're trying to say. Like we're trying to say that right now Bitcoin is competing with all these other residential customers, but in four years, that's not going to be the case. And if you stop it now, you're really extinguishing something that has a beautiful probability

to just flourish in the energy world and make really positive change. So that's an argument that I try to have, but it's difficult to have. It always is amusing when, you know, I guess we realize maybe they don't, that the climate hawks on Bitcoin are weirdly positing the most bullish price models. And they don't buy. imaginable. Yeah, it's like, well, yeah, just, yeah, clearly you should be buying Bitcoin if you're this optimistic on it. But yeah, that is one thing, and I think that's the most subtle thing, the most misunderstood thing, is that Bitcoin's disruptive nature on the grid is very bounded

by this dollar per megawatt hour sort of ceiling that generally comes down. or at least there's real constraints on how high it can go. I mean, it can spike with price, but as hash power rises, you know, it comes down. It can spike. But when you're talking about generation assets and grid infrastructure, most of this stuff is on a multi-decade depreciation schedule, right? So this is kind of how I see it is, yes, you've got Bitcoin price spikes, but I mean, they last for months. Like, right? They last for months.

And so when you're talking to it, and this is a double-edged sword whenever you're trying to do a co-located project that's, you know, the solar or wind farm is going to be there for decades. And they look at you and they're like, how come your financial models don't co-pass like 20-25, you know? And that's just, well, you know, the hash price is so sensitive. It would basically be throwing darts out of wall. The other thing I want to address in this report. Sorry, I keep going back to the report. I mean, this report has been like dominating my attention for the last week. It's good.

It's a good topic. I've been dreaming about the report. Oh, no. I can't think of anything else. It's when I close my eyes, I see the report. I went through every word of this thing. It's frustrating. I don't want to talk about the citations.

I don't want to talk about DeVries. Okay, the fact that he's in a government report is preposterous. Just absurd. This is the Office of Science. technology policy. They should be adhering to the methodologies of science. Okay, so here's a question. They have this contrarian view or more, say, sober, critical view on demand response. So they do acknowledge the Bitcoin miners can enhance grid flexibility. They can do demand response. You know, that's a good start. I'm glad they acknowledge that. Someone must have told them.

However, they're not really that positive on it overall because they basically say that the existence Bitcoin forces the grids into demand response situations. So it's like the arsonists, you know, the firefighters putting out the fire that they said. So they say, quote, while reducing this peak during a grid emergency is valuable, the increased peak is often why demand response is necessary, establishing mislined incentives between crypto asset miners and grid operators, they basically are implying here that miners, because they can profit from these demand response events, that they are almost causing them deliberately so they can sort of cash in. What is your reaction to this? Yeah. I mean, there's a lot to unpack here.

There are a lot of different assumptions, right? So you only really make a lot of money during a demand response event if you have bought a hedge. Okay, so I'll try and not like talk too much about like the hedges, but effectively, a hedge that you buy would be a wholesale transaction where you're buying power forward from someone else. Like in Urquhart specifically, you're buying it from a counterparty that thinks that selling you the hedge is in their best business interest. Okay.

Perfect example here. would be you want to lock in power for the next 10 years, right? Bank of America is willing to sell you power in Urquot for 10 years for 60 bucks. Bank of America ran the numbers, right? Bank of America thinks that them selling you power for $60 over the next 10 years gets them a 15% margin because they either are willing to take the real-time risk, right? because if they owe you power for 60, but the real-time price is 50, then they basically cover their short position. Or they have bought enough power from generators at a discount that they can lock

in their margins. So Bank of America thinks they're making money off of you. Okay. So they sell you this hedge. You as a Bitcoin miner can now either take the $60 per megawatt hour power and mine with it, or you can turn off and sell that power back to the grid. You're not really selling the power back to the grid. Really, you have title over some amount of megawatts that you didn't use. Right. So it is liquidating. Okay.

So you're, this is Bank of America selling you this power. Not Urquat, not a utility. And, you know, you can tell that this argument doesn't really go well on Twitter when you're trying to argue with people. Yeah. But the idea is, and here's the idea behind deregulated electricity markets, right? Here's the steel man for it. The steel man is that you buying power 10 years ahead of time is a price signal in and of itself.

This is telling Bank of America, hey, you should hedge your obligation to sell me power. How are you going to do that? You're going to probably buy from generators, right? So this is the price signal actually working in real world, right? So if the Bitcoin miner wasn't doing this, Bank of America would not have a reason to buy power forward. And so this is the idea, the steel man, if you will, of the Bitcoin miner is willing to give long-term price signals for people to procure energy. But then at the same time, they're also willing to turn off when that energy is needed for the customers. It's the perfect customer of electricity.

I'm working on an analogy right now, which is, you know, those barbershops, that don't have wait lists, right? Like you just come in and you wait, right? The Bitcoin miners are the people that like to get their haircut every day. So they come in and they're sitting there and they're willing to pay the barber 10 bucks, right? But if someone comes in and they really need a haircut that day,

the Bitcoin miner is ready and willing to let them skip the line. So all the Bitcoin miners are in there getting their haircut and the barber says, ah, we should hire more barbers because there's all these customers here. But at the same time, they're willing to let people skip the line. So that's like the analogy that I like to use and saying that what the Office of Science and Technology is completely discounting is the price signal, which is the base assumption of a deregulated market is that the price signals are important. So they just fully ignored that aspect.

Well, they ignore the supply side, right? They ignore that the signal should lead to more generation. Yes. Wow. Yeah, that was a great explanation. So what happens when Bitcoin miners turn off and choose not to buy the power at whatever? Well, do they have a hedge or not? In the case that they do have a hedge, what mechanically happens there?

Well, it depends. Is it a physical hedge or a finance? So generally, so generally what happens? Let's say you buy power forward at $60 a megawatt hour. You're a 100 megawatt Bitcoin mine. Right. So you basically mine, you mine. It doesn't matter what the real time price is. Real time price could be 40 or a thousand. It doesn't matter. You pay 60, right? If you turn off, you then own 100 megawatts at your settlement point that you're not using. You would turn off because you have agreed with the operator. There's two things here. So there's economic curtailment, which is. theoretically demand response, but I would consider it lowercase D, lower case R, demand response. But this still gets called demand response, is the economic dispatch.

It gets lumped into this. Okay. So this one, what I'm saying right now, let's pretend that you're not coordinating with the grid operator. Okay, this is like the less than optimal model. Okay, so the grid operator has no idea what you're doing, right? But you know that mining Bitcoin, you earn $100 a megawatt hour. Now all of a sudden the grid price goes to $200 a megawatt hour. Well, you can turn off.

Technically, you still owe Bank of America $60 per megawatt hour. It's a take or pay PPA. So you owe them regardless. But when you turn off, you now get title to your megawatts at the real-time price. So you make 100 megawatts times $200, but you then pay Bank of America 100 megawatts times 60. So you make 140, which is better than what your Bitcoin break-even price is. So this is the model of economic curtailment. You are, because the spot price of power is going really high,

you decide that it's better just to sell that and sell it to anyone else as opposed to sell it to the grid. Sell it to Bitcoin, rather. It's, yeah, you're not really selling it to anyone. We can get into how the power market works, but effectively at any time in, the in the market, you have what's called an energy imbalance. And the energy imbalance is the delta between power you already bought and power you're consuming. Right. So if you already bought 100 megawatts and you're consuming 100 megawatts, your imbalance is zero. And that's what you owe at the real time price. If you already bought 100 and you're not taking down any,

then you now own 100 megawatts at the real time price. So you just get paid that. Right. This is lower case D, lowercase R demand response, no coordination with the grid operator. Upper case is formal program, which is what gets talked about a lot, where mine is opt into these. Exactly. In the formal, in the formal program, you are explicitly bidding yourself into a program where, let's say you're doing CLRRS, right? Controllable Load Resource, Responsible, reserve service and let's say you're offering urquat your service for $15 a megawatt hour like you then get $15 a megawatt hour for whatever hour that you're bidding into that service and you then tell urcad hey you dispatch me based on this curve that i'm sending you right

and so urcott then has complete control over your dispatch they tell you what to do that's a that's the formal program and there's like nuances and a asterix there over whether you can still get paid by your hedge or not. Well, that's what I was going to ask. Are you getting double paid in that situation? So kind of, not really. So there's a portion of the real-time price that's called the operating reserves demand curve that you actually still owe, right?

Because Urquat doesn't want you to care whether or not you're dispatched. Okay, so they still charge you if they dispatch you down, some portion of your settlement point price. And that's to keep you agnostic as to whether or not they dispatched. at you. And when I, you know, when this, like this is now, it's incredible demand response, you know, Bitcoin people were talking about it and then now it gets talked about in the press, but pejoratively because it's like Bitcoin miners were cashing in during, you know, this grid scarcity event. How dare they? I think I might have asked you this last time,

but I don't know if we talked about it on the podcast last time, but what, how should we be thinking about that? Like, is it bad that Bitcoin miners are getting paid to be offline during a grid scarcity event? Oh, I mean, is it bad? Well, it depends on how you look at it. If you look at it from like a marginal economic perspective, you want the Bitcoin miners to be off, right? You don't, you don't want them online during a grid scarcity event such as that. Now, if the miner is hedged, which as part of a good business model where 95% of your operating expenses is electricity cost, you probably want to be hedged. Now, if you need to be online 24-7, then you want to be hedged 24-7.

That means that if you turn off in like a take or pay, you get paid. Like, you get paid whatever the price is. So the only other alternative is for them to have been online. Like, that's how they wouldn't have cashed in, right? If they would have been online instead, then they wouldn't have cashed. cashed in. Now the, so so whether or not they're enrolled in uppercase DR, they're just doing lowercase DR. They're probably offline because price, spot prices are high during a scarcity event. Correct. There's there's tons of nuance here. One of which is that Urquhart artificially

kept to the price at a max, right? So Erkot artificially kept to the price at 9,000 because they had dropped a load. So in Erkot's perspective, the price at 9,000 was necessary as a price signal to new generation to say, hey, we don't have enough demand to meet this load. So we need to keep the price high so that when people look and they imagine this. Now, the problem is that someone had already sold riot all their power forward. So hopefully the person that was selling riot all that power at $9,000 was hedged themselves. Like hopefully they were generating into that, right? That's like the steel man of the argument is that the person that sold riot the hedge was generating power at that price so really they're just handing

riot their upside but so to sum up it's not bad if um the transparent d r that we have a record of is occurring i mean it is fully sort of like in line with the grid operator objectives it's well you and i can say that but there's also a portion of this which is like prices prices can be too high right like like it's good to make money as a business model, but maybe not if there's people that don't necessarily understand the logic behind your business model showing up with pitchforks. Yeah. Right?

Like you don't necessarily want the headline risk of making tons of money, you know, during a certain event. So it's, it gets really nuanced in terms of like what's the best decision to make here. Yeah. It's kind of like if you are short something in a financial crisis, you can always risk not being paid out because. there might be things that break so much such that you can't collect on your short. Exactly.

And that's been part of the thing with some of the articles that I've read on Bitcoin miners that made a lot of money during Yuri is they're getting paid in power credits, right? Which is interesting because a lot of times, at least for the financial hedges, they're paid in cash. Right. So how come they're getting paid credits and not cash? you know like there's again there's lots of things that we can talk about this specific issue and I can go into detail more but yeah I feel like the last podcast was the DR focused one but it's like an endlessly complex topics seriously so complex I'll just say one last thing one last thing on this

is just that the lowercase DR it's power trading that's the best way to think about it right like people people do power trading all the time that's that's what the Bank of America is are doing, right? They're selling you power for 60 bucks. They're shorting. They're shorting power over 10 years, right? And like this is a main business model. People sell power ahead of time all the time and make money off of it. It's just whenever you get a huge windfall trade, because the Bitcoin miners theoretically just going long power and paying the premiums with their mining revenue. That's all they're doing. Right. So the problem is, is their headline risk whenever that trade makes you a windfall.

Yeah. Yeah. It's interesting where being long something gets you the headline risk, but because it's power, it implies human misery if it becomes very expensive. Typically, it's the other way around where you've headline risk if you short something. Right. It's the typical debate, and this is like an awful analogy to make right now, but it's the same debate whenever, like, during disasters, when people are selling water for really expensive,

You've got some people that say they shouldn't be doing that. They're scalping. And then you've got the other people that say, well, if they didn't sell it at a hire, then someone would come in and buy it all. So you kind of have a similar aspect of, like, is the price signal important at this time? Like if the price signal is important at this time, then we should keep it. And you're seeing that now in Europe. Or actually in Kaiso, in California, ISO where they almost had a blackout.

and Kiso had capped their price signal at $2,000 a megawatt hour, and they were finding that batteries were actually not discharging during system peak. And one of the things that people are saying is the reason for that is that they didn't have a higher price signal. So like the battery dispatch is calculated, right? The battery dispatch is literally, what's my best opportunity to make the most money? Let me charge during the lowest and discharge during the highest. if the price signal can't tell between shoulder hour and peak hour, then you're not going to be able to optimally use that energy.

And so it's like it's this whole debate over how useful is the price signal. It shouldn't be surprising that putting a price ceiling led to shortages. That's just like the classic economics thing. But yeah, I mean, it's the same in Europe where prices are now being understood as kind of like vacuous and like maybe not even that relevant anymore. because we're going to maybe just go to a command and control top-down system. Correct. Or like windfall taxes, revenue caps, et cetera.

Yeah. Yeah. So I guess with political force major, maybe all of our, you know, delicate reasoning about markets doesn't matter anymore. Yes. That's possible. It's certainly a risk. Hopefully not in Texas.

Okay. Well, we'll leave it there for today. Like, we didn't get to any of the coalucation. Bitcoin miner discussions. That was one of my hopeful topics on the first interview as well.

But maybe we'll have another one. Well, the good news is that by the time we do the third episode, there'll probably be more data and miners that are actually doing this that we can talk about. But thanks again for indulging me. This has been great.

Very informative. I was learned so much. Hope the listeners did as well. And yeah, we'll see you next time. Thanks, Nick. Well, actually, do you want to, like, direct anyone anywhere? So I've joined Galaxy as a power markets engineer. I have a Twitter.

I have a Twitter that I used my pseudonym for. It's H. Hornblower, 95. I sadly didn't think about it before I started publishing articles and stuff with my old naval ship character pseudonym. But that's where you can find me on Twitter. I've written a couple blogs for brains looking to write another one on forward hedging strategies and economics. What is H. Hornblower?

So you don't know who Horatio Hornblower is? I've heard the name. I don't know what that is, though. And thank you for giving me the opportunity to describe this. So if anyone likes naval warfare 18th century fiction similar to like master and commander, things like that. I love that, Phil. Yeah.

So Horatio Hornblower is a. fictitious character. There's like 11 books, I think, written that follow him from basically being like a midshipman all the way up through the ranks. So my favorite book series, I've read it a couple times. I would highly recommend people order and give it a read. I read books like that when I was a kid, like Sharps rifles. I don't know if you ever.

And like the British one is like this aviator called Biggles. There you go. And I think it's, yeah, common. Master and Commander is a fantastic movie. One of the greatest. That's a good book too. Oh, I didn't know his book. I think in the film there are no women that appear in the entire film or possibly no women with dialogue.

It's one of the rare films where it's literally just guys. Is that the one with Russell Crow? That seems right. I know they made a Horatio Hornblower one, but it was like in the 50s. So I was wondering if there was like an older Mastery Commander. What I'm excited about is. like the Napoleonic Wars coming back into pop culture. There's,

you know, I think they're underrated as like a historical period. Yeah. The, not to continue the plug, like beat it to death, but the hornblower books like follow the Napoleonic Wars. And I think,

I think hornblower himself is supposed to be modeled after Nelson, which is, you know, famous British admiral. Yeah. Yeah. Anyone that's even mildly interested in what we're talking about should certainly get at least the first book off Amazon.

on. Okay. Into it. All right. Thanks to God, Blake. Yeah, no problem.