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Bitcoin miners in Texas have become vital grid stabilizers, cutting load during scarcity and boosting utilization as ERCOT prepares for surging AI and renewable demand.
This episode shows how Bitcoin miners in ERCOT, now representing ~3.5–4 GW of load, have become uniquely valuable grid partners by instantly curtailing during scarcity events and ramping back on when power is abundant. Unlike industrial loads or AI data centers, miners convert electrons directly into money with no downstream customers, allowing precise, machine-level control and pure responsiveness to real-time prices. Within Texas’s deregulated energy-only market, they help flatten price spikes, improve utilization of stranded wind and solar, and participate in ancillary services. Compared with batteries, excellent for short-term frequency balancing but storage-limited, Bitcoin mining provides round-the-clock demand that can be shed indefinitely, positioning it as a critical complement to renewables, natural gas, and emerging AI compute loads.
This conversation highlights how Bitcoin mining in ERCOT has matured from a misunderstood experiment to a proven cornerstone of grid reliability. Miners’ ability to instantly curtail during scarcity has turned them into valuable partners for operators, a role unmatched by AI data centers or traditional industry. As Texas braces for unprecedented load growth, the lessons learned from Bitcoin’s flexibility will shape how ERCOT accommodates AI, batteries, and future technologies. At its heart, mining demonstrates how markets, innovation, and energy intersect, positioning Texas as the global proving ground for the future of power and compute.
0:00 - Winter Storm Case Study & Mining Response Data
11:34 - Why Bitcoin Mining Is Uniquely Flexible
13:12 - ERCOT's Deregulated Market Structure
20:54 - Grid Reliability & Winter Storm Uri Lessons
30:47 - Demand-Side vs Supply-Side Grid Balancing
37:40 - Public Concerns About Power Costs
45:36 - AI vs Bitcoin Mining Load Comparison
55:26 - AI Flexibility & Grid Integration Challenges
01:13:04 - Bitcoin Mining vs Batteries as Grid Resources
01:33:27 - Future Outlook & Cholla's Strategy
(00:05) Brad, welcome back to Austin. Parker, good to be here, man. Um, last episode with Pierre, we went real deep on the difficulty target and the difficulty adjustment. Um, today we're going to talk about mining in Urkott. Urkot generally, grid mining, but also talking about the broader market and how Bitcoin mining fits into that.
(00:30) So, we'll inevitably get deep, but appreciate you being here and recording. Got Brad Cuddy from Choya, Inc., what does the hat say? Never stop exploring. Never stopped exploring. Yep. We've got to figure out uh if that was a Gideon Pal original or if it was passed down, but love of the hat. I shot him a text. No answer yet. So, not yet. DBD.
(00:50) All right, we're going to dive right in um to an actual example of how Bitcoin mining is interacting with the UrkOT grid in terms of winter storm and around scarcity events. And then we'll kind of come back up for air to talk about how different levers why things are happening.
(01:23) But there was a chart that Urkott had put out during winter storm Heather in January of 2024 that the the storm spanned two or three days and the the price of power effectively increased from, you know, $15 a megawatt hour to on a log scale looks like $750 to $1,000 a megawatt hour and approximately 1.1 gawatt of power a specifically large flexible load came offline the power price came back down basically peaked came back down another scarcity event this time almost 1.
(02:16) 6 6 GW of large flexible load came offline and then there was a a third peak and similarly. So talk about the actual incentives that are driving that and what might be happening to create a scarcity event in Urkot during the winter and then how helps manage that and how Bitcoin miners play into it. Yeah, I think this is the this is really hitting on the the beauty of Bitcoin mining in Urk.
(02:43) It's a completely economically rational uh responder to a price signal. Uh you can see there that they have a line drawn at what is it 120 megawatt hours is like a assumed average of break even price, right? 122 megawatt hours, which is what Urkott had calculated as what they viewed Bitcoin mining's break even being based on a S19 J Pro, which is just interesting that someone at Urkott is doing this math, presenting this to Urkott.
(03:15) Yeah, when Evan Neil was at Urkott, he was he was in the weeds. He's a Bitcoiner, so we uh we had one of us in there. He since left, but I digress. Um, so what you can see is that the pink highlights on the graph, those are Urkott issued conservation appeals.
(03:38) Those are alerts that are coming out via your retailer or your quezy or even like to a residential uh user on your app being like, hey, looks tight. We don't know if we have enough generation to serve the projected load. So if you could, you know, you know, not use as much load, that would be appreciated. So, and this is when in a in the winter, everyone's running their heaters. Yes.
(04:01) Freezing temperatures, maxing it out, right? And temperatures are going down. So, it's it's likely at some point early in the like overnight, early in the morning, right? It it's it's likely, yeah, overnight early in the morning. Uh, we have that in the in the winter time, it'll peak in the morning time.
(04:18) Sometimes you'll get an evening peak, too. But the load curves look completely different on uh on uh winter versus summer. But here what you will what you'll see is um the blue which is the total large flexible load start to step down as that price line the black line starts to go up. So the miners are doing this um purely off of like an economically rational decision.
(04:44) Like if if you're making 120 bucks a megawatt hour and power costs $200 a megawatt hour, you're losing money. It's a quick way to go out of business. Like you do not want to be doing this. There's a potential to have some layered on hedges or like be committed to an ancillary service. So you have to keep your load on.
(05:05) Like don't want to get too too too nuanced here, but the Bitcoin miners are responding to the price. The price is a signal of generation scarcity. As generation um becomes more and more scarce, it goes up and up the generation offer curve and it settles at the uh lowest price generator that clears the market. And so in this situation, there was less and less generation.
(05:32) They're um likely hitting the ODC operating reserve demand curve. That's just that's a long string of erdcain that sorry ord. Yeah, operating reserve demand curve. And so that basically when UrkOT gets to I think it's 2 or 3,000 megawatts worth of reserve capacity left, meaning latent gen that can turn on like when it's when load and gen is within $2,000.
(05:56) They start increasing the prices to send the right price signals to have every generator turn on. Whether it's like this old steam generator, whether it's a marginally economic coal unit, like they're sending the price skyhigh and then hoping that the market responds and you know acts rationally in an economic basis and Bitcoin money does here. And so on the other side on the other side. Exactly. Yeah.
(06:19) Because the price is going up and nobody wants to eat a,000 or $2,000 a megawatt hour. It's a it's a very quick way to to lose money. So if someone is looking at the chart when this winter storm starts there's about 2.2 gawatt of large flexible load which in your mind is that ver virtually all Bitcoin mining. Yes. Yeah.
(06:49) Yeah, practically speaking, yeah, there is, and we'll talk about why that's the case, but just wanted to to touch on this now that as the as the market price started moving up before the first conservation notice, about 500 megawatts had already come offline. And then as the price ramped further another 1 gawatt of power came offline and a bitcoin a bitcoiner would look at that and say like that's that's Bitcoin mining helping the grid but this interesting note from from which is basically saying not all large flex not all not 100% came offline but making making that point right Um, but then
(07:42) basically the market price comes down, the large flexible load comes back up to like 1.9 gawatt and then the next time there's a conservation notice 1.6 comes offline. Yeah. Um, but just talk about the um the relationship there. Like it's not a it's a request 100% of the market, right? Even like grandma and grandpa at their house. This is a this isn't a notice that's going out just to Bitcoin miners. Correct. Yeah.
(08:15) This is is uh this is an you knowwide notice conservation appeal. And you can even see on that third section there wasn't even an OT conservation appeal which is indicated by the pink. But the Bitcoin miners responded to the price anyways. And it's interesting because the the price if you if you look at the price on that third peak goes higher goes higher but there's not the conservation notice.
(08:45) So what would is that because they have more generation available? You know, I'm not sure on this specific um that specific peak. It could been um they were forecasted a warmer temperature and it actually was colder. So they didn't have the time to put out a conservation. Nobody's going to read it at 3:00 in the morning if this is like a morning hour peak.
(09:06) Um or it could be that there's there's more to system reliability than just price. Um so they might have felt that they had enough operating reserves uh to to satisfy enough ancillaries or or whatever it might have been. Um but there is there is more to reliability than than just price.
(09:27) And then the last thing because I have a few of these charts. We won't bring the other ones up, but to to lead into the broader discussion, it is relevant that Urkott is looking at this and tracking it and paying attention to not just what's supposed to happen in theory, but what's happening in practice.
(09:52) But that if we looked at a similar analysis that Urkott had done in 2022, there was approximately 1.5 gawatt of large flexible load around a a scarcity event on the grid to start and then in 2023 1.9 gawatt and then this example that we were talking about from September 2023 to January 2024 2.2 gawatt.
(10:21) is that this amount of large flexible load continuing to to increase approximately how much Bitcoin mining is on grid ink today would you estimate? I think the LFL large flexible load estimation is right around 3 and a half gigawatts. Uh LFL's the classification is greater than 75 megawws. There's also a lot of miners sub 75 megawatts whether it's transmission level but just on a 50 megawatt interconnect or distribution level like that we are too.
(10:53) So, if you add all of that up, I think we're probably in the high three gigawatts, maybe low four gigawatts. And to put it all into perspective, total systemwide um peak load, I think, is 85 or 86 gawatt. So, it's it's a significant portion. Is that fairly consistent between the summer peak and the winter peak or is that that 8586 gawatts of power being demanded summer peak? you know that's the summer peak but we are shifting towards most likely to being a winter peaking system.
(11:24) Interesting. Um, and then so to to transition this into a more general conversation, talk or what in your mind allows Bitcoin mining to to be flexible when other sources of demand for power on a grid system are not and how that benefits the grid. Yes. for the first part.
(11:59) Um, you know, every other industrial electrified process on the grid has electricity plus some process equals some widget or output, steel, aluminum, whatever it is sold for dollars. So, there's like because of the added complexity, the added workload, you know, people, staffing, all like raw materials, um, if you don't finish a smelt, maybe it doesn't go all the way through and you have to like throw something away.
(12:23) uh Bitcoin mining, we have no customer, we have no output besides money. We're directly transferring electrons into money. And because of that, we have the purest, most rational um price behavior and response that there is. And and what how that benefits is like what you saw there, right? Like price goes up, Bitcoin miners as an economically rational consumer of electrons will respond to the price as long as the incentives are aligned.
(12:55) And that's why I think Urka is is so great because you you can in the deregulated energy only market participate in this and that's why you saw so many miners flock here and what does it mean for Urkot to be deregulated and how does that compare to other grids in the United States? So what's what's still regulated in Urk is the transmission and distribution companies.
(13:21) What is deregulated is the generation generators and then the retail side. Like that's why Texans have retail choice. Like you can go shop around for your electricity. That's part of the deregulated um movement that came in like I think the late 90s early 2000s. Um so because of that like you have the um the access to this real-time market and the day ahead market that has created in their energy only market and so is it the fact that there's a real time price that that real time price doesn't necessarily exist in other grids because I think if I'm understanding
(14:07) incorrectly. The fact that the real-time price exists and it's being communicated to all of the the market at any one time, that allows a purely economic actor like a Bitcoin miner who again doesn't have a widget that they're producing or manufacturing plant that's running or a hospital that has patients or a grandmother, grandfather in freezing weather to to respond because they have the price signal.
(14:40) But is there something about Urkot that has, you know, cuz I I consistently hear the term real-time pricing. Does that not exist in the same way in other grids that makes somewhat unique? And I'm not an expert on like Kaiso, PJM, all these other grids. Uh, I don't know for certain on their real-time pricing, but I also don't know if like as a consumer, as a Bitcoin miner, consumer of electrons, if you could have access to that that real-time pricing.
(15:13) So, I think that's really what Urkot has different is like the ability as a Bitcoin miner to access that that real-time pricing and respond economically, whether it's to the load zone pricing or whether it's to the node pricing. And then as we've seen the large flexible load increase, so from 2022 at 1.5 gawatt, September 2023 1.9 gawatt, January 2024 2.2, and now estimating between 3.5 to four.
(15:45) How does scale factor in to not the Bitcoin mining operation itself but the ability to have more power come offline at part or at points where there is scarcity relative to generation coming online right like I mean naturally as the amount of Bitcoin mining load increases is on the system. Um, it gives you more flexibility.
(16:21) You know, 4 gawatt of load that is able to turn off on a price signal is a massive boon to the to the system operator. You know, what what they don't want is it all turning off at once. And um you know we have a responsibility as Bitcoin miners as stakeholders in URK to to be good stewards to like follow ramp rates to act responsibly and economically rationally.
(16:47) Um, but it's it's only good, you know, because of how much intermittent generation is coming to Urkott, whether it's wind because the wind belt intersects North Dakota to West Texas and then the solar belt goes from California to West Texas. We have a ton of intermittent generation. Uh, for the most part, it was stranded for for a long time. It was stranded.
(17:07) I think over the last eight years uh so pretty much since uh the inception of you know Hav Ranch when Gideon went out to West Texas uh and this isn't just Bitcoin mining it's some oil and gas load but the load in West Texas has increased I think it's at least threefold load is is demand for power load is demand for power instead of generation the generation was already going to West Texas because that's where the wind and that's where the solar is where Bitcoin Bitcoin is a location agnostic consumer of that load. It
(17:42) doesn't need to be close to a city center. It it goes where it like it goes where it can. It goes where it wants where power. Exactly. And so if you have all this generation sighting out somewhere that doesn't really have that much load, it was a natural incentive created by the market to show that Bitcoin mining if you can cretel like if you can respond to price, West Texas is the place to be.
(18:13) And we've seen that over the last eight years three times the total load as in load zone west which is a classification of you know all the way to like pisio monahans midland basically the the entire perian and delaware basin is in load zone west all the way down to big bend and then over to abene I believe and so to have the frame of reference you mentioned that at peak like peak peak. Mhm. Demand might be 85 gawatts of power.
(18:44) Yeah. And Bitcoin mining might be 4 GW. That if it were only 100 megawws, the ability for the market to to feel an impact of that to solve a problem is lower. But what's functionally happening and again power has to get to specific points on the grid that it's just to use a rough example everything's more complicated than this that as demand is going from 81 gawatt to 85 gawatt 4 gawatt coming offline versus the highest cost generators coming online is what helps mitigate maybe that price ceiling that the that the entire market would have to bear. And so as Bitcoin
(19:39) mining represents more, at least in peak times, it can help solve a larger problem for greater scarcity events. Correct. Because we're we're not on when the price is going high. Like $122 a megawatt hour is 12 cents a kilowatt hour. most people's delivered power in the entire greater United States is is greater than that price where all pretty much all Bitcoin miners are off, right? And this is in this was in January of 2024. Hash rates increase significantly.
(20:12) So that that perceived break even or marginal break even for Bitcoin miners might actually be lower at 6 cents or 7 cents a kilowatt hour. Who who knows what it is? But um that that it's not static. two two concepts and we'll talk about one of them first. You talked about ramp m ramping down and ramping up. Somebody might generally understand Bitcoin miners responding to price signals, but Urkott's the electricity reliability council of Texas that talk about the actual challenge and why having to balance supply and demand is not just a market function but a reliability function of
(20:59) the grid itself. And to go into a little bit of detail when you were talking about the importance of how say a large load might ramp down or up to be a uh not a steward but a good market participant. Right. Ever since Wintertorm Yuri, which every Texan remembers, Urkott's been in the in the limelight.
(21:24) uh as much as they don't want to be. But uh for those who for those people who are not familiar with Wintertorm Yuri, that was it was actually before my time here. It was 2021, I believe. It was a cold snap that lasted something like 9 days. Um and there was various reasons for uh for it, but price price went to the cap, but at that time it was $9,000 a megawatt hour.
(21:52) um generation was unable to blackar, pipelines were fro freezing, wasn't sunny, so the solar wasn't producing, no wind. It was like a black swan through and through. But, uh, it ended up with, you know, a lot of rolling blackouts. And when people lose power and it's super cold and you can't turn on the heat, uh, you know, our young and our old are are susceptible to that. And so there was there was death that was associated with it. It was it was top of mind for everybody.
(22:17) Um, and that just highlights how important it is for Urkat especially because it is um an island and system. And I'll just explain that real quick. Yeah, if you could. Uh, so the entire eastern part of the United States is under the eastern interconnect. Uh, it's all electrically connected.
(22:36) the entire western part of the United States, you know, every everywhere from uh Washington State down to like New Mexico over to Colorado and maybe like the bordering Nebraska or whatever, uh is is electric electrically connected. So, they have all that generation, all that spinning mass. They've got nuclear here, you've got solar there.
(23:00) Like there's there's a lot of support from the entire grid, you know, like okay, like how much could it actually support? It's so far away. like electrons travel at the speed of light and like not to get too tech like they don't actually travel blah blah blah but it's it's very quick and so with all of that systemwide generation all that systemwide load uh the interconnect can support fluctuations voltage fluctuations generator trips load trips uh just because of its inherent size is is completely electrically isolated it is essentially you could imagine in an island it It has like small DC ties like
(23:35) direct current. That's what I my understanding was that there were some ties but I don't know enough to know how or to what extent. Yeah. So a couple gigawatts of DC but the thing is our grid doesn't run on DC. It runs on alternating current. You know it's three magnets spinning around generating current.
(23:56) It's like that spinning mass is what generated our electricity pre wind and solar. Um, and so that creates the alternating current that is is like the heartbeat, the 60 hertz of our grid. Uh, so the DC doesn't help support that. So it gives us a little bit, but it doesn't give us the uh the support. Um, and so why why was so unique is because of that islanded situation like it has to rely on itself.
(24:26) And so because it has to rely on itself, it needs to prioritize reliability. like you said it's it's it's in the name. Um, I got in the weeds and I forgot a little bit of the question, but so like talking about the function within UR or how loads, how they ramp up or down from an actual grid reliability standpoint is a concern beyond just price volatility and Bitcoin miners responding to price to come off that um how they do that right is consequential but just talk about that concept and I and I think something to highlight too is that you know
(25:13) Bitcoin mining as a load might get a lot of criticism or like oh it goes off too quick like it's not following a ramp right or it's um you know previously the conversation was is this even real like is this just going to go away um I don't I don't think we get enough credit because we are able to like very very fine-tune uh our load.
(25:36) Most load that is on the grid is is like heating load. It's totally blind to OT. They have no visibility into this. Uh Bitcoin miners if they you know qualify as a controllable load resource, they're able to submit their uh load curve into into Urk. So they have complete visibility. all generation submits their their um generation stack into the curve.
(26:05) Uh on the flip side, submitting the load side into into the curve allows URK to match help with system reliability. Um ensuring that the frequency is in that and it has like the the range of 60 hertz. It has to be within a very tight band at all times. Correct. Yeah. Yeah. And like that would be that would be supported via um ancillary services like fast frequency response regulation up regulation down.
(26:37) It basically will request you know say frequency goes too high meaning the generators are spinning too much. You need to bring load up bring the frequency down. Say frequency goes too low means um not enough generation on the system. You bring load to match. And so that's something that Bitcoin miners were part are are participating in. Uh however, batteries are able to do it pretty well. So they have kind of eaten up most of that market.
(27:03) Uh but Bitcoin miners are in other services like non-spin or uh ERS and these are like all basically URKT has because there's no capacity market there's it's just energy only they have some different ancillary when demand response is basically what this gets lumped under but the technical term is like an ancillary market the ancillary market has different products that can be bid into um as a load or as a generator.
(27:33) And so Bitcoin miners can provide these ancillary services to URK. And this is you know like for example uh the controversial riot filing in like September during an EA event. They committed their load to um they committed their load to be an ancillary service. They said we will stay on and we will only be curtailed when you tell us. So they ignored the price.
(28:05) You have to have a hedge to do this otherwise it's not economically rational. But they use their Bitcoin mining as a way to support grid frequency or voltage or whatever it was. And by doing so they are paid. The thing is like the the bucket of ancillary services is it's like it's it's on a bid basis.
(28:30) they they clear as the lowest bid and so if Riot was called as that ancillary service that means that they were one of the lower bids. So as batteries and bitcoin mining reduce the like the cost to bid into the ancillary services all air stakeholders benefit from it right because if I'm interpreting that correctly because if they weren't there somebody with a higher bid correct it would have been a steel mill or a heavy industrial that wouldn't have that uh fine nuance control of being able to like step down you know 20% of your load load every minute over the five minutes to get down to certain targets, right? Like you can you can
(29:10) fine-tune Bitcoin mining like each minor is 3 kilowatts, right? You can you can selectively curtail to bring, you know, if they tell you to go I want 1,000 megawws to go to 654. Like Bitcoin mining can do that. Could a steel mill do this? No. Could a refinery do this? No. Batteries? Yes. They they could also do something like this.
(29:38) and then generation on the other side can also ramp up to a specific capacity as long as they have that. But um that's like something very very unique with Bitcoin and maybe the highest level importance of this is that if those the demand for power and the generation of power is not lined up at all times and if that frequency isn't in balance then that's where you get blackouts or brownouts. And if there was a crazy event where the potent potentially the whole grid could go down.
(30:12) Is that fair? Yes. Like voltage out of sync, frequency out of sync. Yes. It can all that's that's the the the main concern. And historically before Bitcoin mining, the the primary way that load and generation demand supply were balanced was by supply changing. Correct. The like generators coming up down. Is that is that fair? Yes, it was by generation.
(30:48) And then um bringing that to the way that that Bitcoin miners come up and down is that because each rig could be controlled on an automated basis, it can be very precise. But even though it might be good from a market standpoint, if Riot's 500 megawws came offline, if it shut off unpredictably, the UrkOT not knowing or based on some ramp down schedule, it could actually have a negative effect.
(31:24) Yes. Yes. Reliability, but because it is so flexible and because it can be controlled, as long as they are, as long as they are in sync with the grid operator, then it can be a real asset. It requires a partnership. You can't just be flipping the breaker on a thousand megawatts on a 85 megaw 85,000 megawatt uh system. Like it it requires you to to be a good steward.
(31:53) Um it's it's it's every large industrial load has to do something like this that like there there's procedures to to be there like we're playing big boy games like we are 4 gawatt in an 84 gawatt system. We are making a material impact.
(32:12) uh we are a large large consumer of electricity in Texas and like like it's time to put on your big boy pants and uh and act like it from your perspective and clearly Perkott's paying attention to how large flexible loads aka Bitcoin miners are performing in practice from your seat. How how do you think that Urkott views Bitcoin mining and what what in your mind is their level of understanding? Not to say any express knowledge, but just your general perception.
(32:44) Yeah, I think overall the perception is continuing to trend more positively. Like it's it's on us as market participants and stakeholders to to be involved and be engaged and and be good stewards. like we need to be showing up to these large load working group meetings up at Urkott. Uh we need to be having the conversations with the system operators that are like in the in the room um operating the the system and talking about what Bitcoin mining can actually do. You know, we're we're in the weeds, right? We're we've we're
(33:16) Bitcoiners. We've got into Bitcoin mining industry. Like we know what we can do. Um but it's it's a matter of it's it's still a matter of education. like you still you still say mining Bitcoin and like you you'll get uh mixed responses, but I do think um really it's it's an ongoing conversation. Uh, we can't we can't rest on our laurels.
(33:46) Like, Bitcoin mining in Texas has succeeded because the Texas market was the most primed to receive the Bitcoin mining uh shift post China ban, but it's not it's not guaranteed like the rules can change and new markets can like a a new rule in the market could be implemented. like it is on us to make sure that we are still successfully um selling ourselves and like and performing to the standard that we are talking about.
(34:22) Um I do think that you know overall the value is seen like they there's like you you can see right there on the chart that you know Bitcoin miners large flexible loads are responding to price like we are doing what we said we were doing. Is there room for growth and is there room for improvement and can we get those like last 100 or 200 megawws down? Like yes, like that should be the the goal of the industry to um to optimize as much as we can.
(34:55) But like time and time again, Bitcoin mining has proven to be a mutually beneficial addition to the Texas grid because we're we're consuming the hours that are cheap. We're consuming the hours where like we are incentivizing more generation to come online. You know, we're on depending on your break even efficiency 75 to 95% of the time, maybe even 99 depending. But you're off on those stress events.
(35:20) If you're off on those stress events, you are net positive through and through to the grid. and like it's it's starting it's starting to feel like we're we are getting some respect and we are they do understand like what's going on and yeah that that's okay that's a good place to to move to next before I do I just want to reinforce something that you said I think it I don't know what year it was maybe it was 2023 there was a because I don't know what the right way to say this isot is regulated by the PUC public utility
(35:58) commission and then the PUC answers to the state legislature. So ultimately, state legislature regulates both the PUC and Urkott. And there was a a bill that Senator Lois Colorts put out that would have capped Bitcoin mining participating to a certain percentage of one of the ancillary service programs.
(36:30) And again, the summary of ancillary services is a tool in the toolbox for URKT to help balance supply and demand to keep the grid reliable. And that's a perfect example of why education is important because even if understanding it and being able to see in the market and being able to interact with the the actual stakeholders, people at the state house need to understand as well because in the example you gave, if it wasn't the riot being there, then the cost of the system would have been greater and there might be nuance in terms of having a diverse market to ensure that the market is competitive but having that
(37:16) education informs policy but for somebody because I think this happened or this I know this happened when Riot went to have their second site in I don't their second site but their second large site in Corsana there were a group of concerned citizens who if they do not understand Bitcoin look that 4 gawatt of power coming online consuming power for a reason that they think is waste or they think is waste they do not understand go into greater detail about how 4 gawatt of power could come online and somebody might be able to conceptualize why coming offline at those peaks might
(38:11) save at the peak. But the general dynamic of why or why not without new generation coming online, how it doesn't increase the power, the cost of power overall or maybe it does. Can you just talk about that dynamic of of maybe how power is priced, how it's absorbing power that might not be being utilized in off peaks and then coming offline.
(38:41) Just that general dynamic to help articulate for somebody who wouldn't otherwise reconcile a lot of demand 24/7 or mostly 24/7 coming on with a fixed capacity of generation. Yeah, it's and you touched on it and you mentioned it. It's just a better utilization. Like these nack gas turbines, these solar farms, these wind farms, they're already in the ground. They already exist.
(39:14) But I the 70% or something like that of all energy is is wasted. Um is is that 70 energy, but it's not electricity. But yeah, and what I was going to ask is that 70% of electricity capacity. Yeah. like Urkott's capacity is much much high like and forgive me for not knowing the number but it's over 100 gawatts worth of capacity we're only hitting 85 gawatts of of uh systemwide peak right and so for short periods of time for certain days of the year you know for you know.
(39:46) 5% of the time is is when that's actually happening and you know overnight maybe your your load is only down you're down to 50 or 60 gigawatts or even lower um and So basically what Bitcoin does is it increases the floor. It it monetizes those hours that um you're you wouldn't be running that generation otherwise making the generation more economic.
(40:14) But the the price that the generator bids in on the curve is it it stays the same. And so as long as coming back to that price responsibil like responsiveness, if price is going too high, Bitcoin goes off and and the the low disappears and it's not increasing anybody's prices cuz it actually like like the studies that have been do that have been done around uh cost of increase of power uh for residential customers has been it's largely around the distribution cost transmission and distribution cost. Um transmission a smaller portion of the dist than distribution and distribution
(40:52) is getting you know power to residential buildings, apartment complexes. It's it's get it's the wires that you see, not the massive overhead wires. It's it's the smaller stuff that's the lion share of the um that's the lion share of why our electricity prices are going up in Texas specifically.
(41:16) Uh Doug Leuen had a podcast talking about this. Uh it's it's not the actual input of electricity cost. There's times where there's pricing on the grid in West Texas where it's negative $30 a megawatt hour, but the residential consumer doesn't see that benefit because they're still getting hit with distribution charges and transmission charges and like a fixed price. like the incentives need to be aligned and they're they're working on that for retailers.
(41:47) Um but having these large loads like the 1 gawatt and corsana it's only increasing utilization and the economic output of a generator and that if that generator is cons like on like it's producing electrons it's paying its tax revenue somebody's buying like it's creating jobs it's creating better utilization of the assets we already have on the grid and and also incentivizing new generation because like Urkott's not contracting any generators.
(42:25) Generators are going at risk and responding to price signals on the grid in order to site their generation and in order to in order to build it like they are they are not guaranteed anything. There is no capacity market. High prices are the signal to generators to go out and build that load. And so as systemwide load and you can see this massive uh interconnect queue in Urkott that they're talking about 150 gigawatts or something like that generators are looking at this like okay this is AI this is Bitcoin largely I AI but some Bitcoin too we're going to go build generation in anticipation of
(43:03) this uh and then the generation bids into the market and that's how you get your energy price but the beautiful thing you know whether you like solar solar and wind or not is that the the input cost to wind generation and solar generation is $0 a megawatt hour. It doesn't cost anything for the wind to blow or the sun to shine. Um the marginal cost the marginal cost. Correct.
(43:29) It ends up having during the solar hours and during windy hours very low pricing. Um so what does that do? It shifts the peaks to when the sun's going down early in the morning during the winter. Uh, and that's providing incentive maybe to batteries if the peaks are only two 2 hours, 3 hours.
(43:53) or if they're long sustained and we're starting to see high prices in the evening time in Loadzone West, maybe a n gas generation wants to go out to West Texas, take some very cheap uh Waja gas, put a peaker plant in there, and then build out some more generation. But the consumers are not paying for more generation to get built.
(44:17) Generations are are going at risk to build this generation based off of the price. And so a way to think about it was part of what you mentioned is if the total capacity of generation is 100 gawatt in OT at any point in time peak is generally 85 gawatt that on a megawatt hour basis it's 100 gawatt times 365 days a year and that if you I don't know what the precise number is, but if you you looked at every hour versus 365 days a year, 100 gawatts of capacity versus what is actually used, it's probably something like 30%.
(45:04) 30 or 40% somewhere in there that if you can absorb more of that asset capacity and have greater utilization, the transmission lines are there that it increases the profitability which allows the economics to improve and also flattens the curve and that's a net benefit. maybe shift to talk about because you brought up two things.
(45:29) You brought up AI and batteries. Let's let's talk about both of those. But first, Bitcoin demand for power and its characteristics relative to something like an AI load or source of demand for the power. How are those similar and how do those differ? And what would be the considerations for a grid system or grid operator like URT looking at both of those? Yeah.
(45:59) And they're and they're definitely different loads even though they may see sim seem similar. But what I will say is that Bitcoin mining paved the way for these AI data centers to come to Texas. 700 megawws at you know Rockdell and one gigawatt at Corsacana. Like that is an unheard of level of interconnect. Data centers prior to this AI revolution were maybe high double digits, low 100s of megawws.
(46:31) So like what? So, I'm going to pause pause that thought because there was something else that I wanted to talk about. Um, that feeds into this, which is we talked about being a deregulated energy market and that what that means is that the generation is deregulated and then the retail market, people actually selling power to commercial loads, homes, that that piece is deregulated.
(46:58) the transmission and distribution is regulated and there's a process to being able to interconnect correct to the grid and that that's a long process. So talk maybe distinguish between the regulated pieces and the deregulated pieces and then how that factors into this discussion of how long of a lead time it might take to get a 500 megawatt site online and connected to the air grid or a gigawatt site.
(47:33) I mean we we'll tie it back to the reliability piece, right? Everything is under the guise of reliability. Like you see this massive load interconnection queue hundreds plus gigawatts. Encore a TDSPs the transmission distribution service providers the wireless companies they have to take these internet interconnect requests and be like are they real? Like we've never seen something this big.
(47:59) Like we've seen a couple Bitcoin mines like this this is unheard of demand. uh and then they have to work with OT to make sure that the system operator uh like nothing breaks in their model. And so it's a it's an aggregation of you've got your load, you've got your TDSP, and you have all working together to try to fit 150 gawatt plus into a 85 gawatt peaking system.
(48:30) And so it's there's a lot of um basically it's unprecedented like there there's they haven't seen something like this before and this amount of growth is utilities grew at maybe singledigit percentages. Postco was growing maybe 6 7 8% which is a very very very high rate compared to everywhere else. uh we're talking like estimations of 15% of able to actually get done, but uh what they're requesting is is 150% of what the URK total systemwide peak is right now. Uh and so yeah, that's wild. It's it's absolutely insane.
(49:15) And you and they're right to take take a step back and be like, is this real? like do we actually have to serve this serve this load? Um and so these AI data centers there's different types of data centers like you've got the you know the models the training model uh training the models that can be um you don't need as good of latency.
(49:40) You don't need to be in the the city centers. Those might be the ones competing for competing with Bitcoin miners like going out to deep west Texas going to stranded assets. Then you have inference inference compute what's actually running your chat GBT answer and query. Uh humans are okay they're all right with waiting a little bit. We understand that like okay it's got to think for a second.
(50:05) Um that inference compute that's closer to the city centers. Uh, and then you've got the the edge where whatever. But right now, what we're seeing in Texas is Dallas is a hot spot. South Dallas is a hot spot for AI compute. Then you've got north of Austin, you've got Samsung, you've got the Gigafactory. Like there uh data centers are coming there.
(50:30) But you do have them coming all the way out to West Texas. and and that maybe is where the intersection of Bitcoin mining and AI compute will be. You know, Galaxy just uh contracted with Cororeweave for their their entire capacity. And so what we're seeing now is Galaxy Digital. Yeah. Okay.
(50:55) their mining business, their mining business is um their Helios, their flagship site, uh has completely decommissioned the the mining infrastructure and is working towards converting to strictly AI, HPC or Coreweave and but say just for a single site, say if a setting aside this crazy amount of of forecasted growth based on all of the requests that have been put in.
(51:29) You want to get a 500 megawatt site online in Urkot. What does that process look like and how long does it take? Good luck is uh is what I would say right now. Everything has more or less uh ground to a halt. uh we came in at the right time and we were early and we're able to secure these interconnect requests. They will they still have like an obligation to serve and the TDSPs have the obligation to serve.
(51:58) What is TDSP? Transmission and distribution service provider. However, the time to interconnect now for a a large load, we're talking years and years and years down the road. like there is no easy access to power anymore. That has been more or less taken up within the last year or two with with all this uh increased load interconnections.
(52:30) And so the reason why the AI d a bitcoin mining data center might be so valuable to an AI operator is the ability to access large amounts of power without having to get a new interconnect approved through her. Yeah, I think we're going to see this and I mean we're already seeing this uh building out generation and power infrastructure is a is a matter of national security at this point, right? Like we are we're betting on AI.
(53:06) we it's an arms race and it comes down to who has the most energy and power and electrons and so we it's it's imperative that we do we do so uh right now they're trying to get all capacity that's left on the market when that capacity dries up and we're looking at 3 4 year interconnect times and they have nothing in their pipeline this is where I would see like the mag you know, picking off the large interconnects. So, you know, like Iron's doing this right now, like they they've become a preferred partner of Nvidia.
(53:44) They were they started Bitcoin mining in Childris, West Texas, close to the panhandle, lots of wind, decent amount of solar. Uh is it near Lick? Uh Childress. Yeah, it's on the way. Okay. It's on the way. Or on the way to Amarillo. Okay. uh 287 or 187. Anyways, yeah, it's it's on the way up to like Denver. So, it's on that fiber corridor actually of Dallas to Denver.
(54:13) And so, they're like a great prime example. They're monetizing the electrons with Bitcoin mining to start and then marketing this to the AI and HBC compute companies like, "Hey, we have this power. If you want it, come and get it. Like, we'll sell you the Rackspace." Um maybe there there's going to be like total acquisitions, right? Like Riots's I know Riot's right now marketing the rest of their course of Canite. They got 400 megawatts worth of Bitcoin mining currently energized.
(54:45) 600 megawatts of lightning capacity. South Dallas is completely locked up. Corsana is not that much farther south than Dallas. It's only an hour drive away. very easily can see the sale of that of 600 megawatts whether it's a total acquisition of Riot or it's um you know them selling that 600 megawws or them hosting with that rack space.
(55:14) So maybe talk about or what is the difference in profile in terms of what an AI data center is willing to pay for power versus what a Bitcoin miner might be willing to pay. Yeah, we're talking orders of magnitude different uh capex spend. One GPU is something like $80,000. It's it producing flops or something like that.
(55:39) Well, is one GPU is how much? I've heard numbers of $80,000. I'm not in the weeds of this thing, but like they're they are very expensive. So, they are incentivized to be running their compute as much as possible. Um, I think their generalized break even number is a,000 plus a megawatt hour. Go ahead. You were going to say something.
(56:01) Yeah. So, a Bitcoin miner, an ASIC Mhm. is between four and 5,000 pricing wise. Yeah. Yeah. You can even get some cheap used ones, but your price for the ASIC probably 500 bucks to 5,000. And then the is $70 per megawatt hour to $150 a megawatt hour currently. Okay. I'm trying to just think about some of the unit economics.
(56:31) So that's Don't use my 80k. No, I'm not going to use your 80k, but like let's say 50k. Yeah. To maybe be conservative. How much power does a on a relative basis does a Bitcoin ASIC draw versus a AI GPU? GPU. AS6, you know, aircooled AS6. We're looking at, you know, low 3Ks, hydro, it's all the way up to 10KW. Okay. and then immersion somewhere in between like five or 6 thousand.
(57:05) I know that right now the GPUs, so they're making it up as they go. By the way, like what Bitcoin mining went through in like S9's to S17s to S19s, like this really quick iteration and burn and churn is happening right now with Nvidia. like the racks for cloud compute like your your compute that ran your Netflix that runs your Google query like your traditional internet infrastructure was like 10 or 20 kilowatts per rack and a rack is like a 48 unit um it's a it's a little taller than a person it's like 7 feet tall
(57:48) maybe uh 10 to 20 kW they are now talking about trying to work towards one megawatt a rack. Like the density is getting absolutely insane. They used to use like rear door heat exchangers. Now they're going strictly direct chip hydro and but contextualize that relative to Bitcoin.
(58:15) the same the same rack and we were we were breaking barriers like 200 kW a rack is what you can put in um with Bitcoin mining AS6 with like the what's minor hydro or the Ardodine hydro or the canon or bit deer those two UU hydro units that you see um they consume 10KW uh and you can put about 200 kW inside of a rack and so I don't actually I don't think H100's are and that's like a common GPU that Nvidia makes.
(58:46) I don't think H100s are to that 200 KW yet. I don't know if they've commercialized 200KW, but they've they're talking about in the future of having 400 600 KW racks and like they're they're going for as dense as possible. as my my and maybe this is a shift that's happening because of AI was that the shift from GPUs to Bitcoin A6 the power density of Bitcoin A6 was far greater than the power density of a legacy GPU but maybe the gap is shrinking because of the Nvidia chips and AI is that we were 100% more dense uh before like it like I was like I was
(59:28) saying like 20KW is what your to your normal racks uh heat capacity was or power capacity 200KW is what Bitcoin was. This was you know like rewind 3 years 20KW data center 200KW Bitcoin mining. They're catching up. I don't think they're at 200KW a rack yet but they do plan on passing us in like rack density.
(59:57) And um my understanding is that the buildout of an AI data center is far more expensive. Something like on the order of magnitude of 10x the cost. That's less consequential than they're willing to pay way more for power. And that is because whatever their end market is their their revenue source is is greater than bitcoins on a power per unit economics.
(1:00:34) Is that fair? Yes. I mean their capex is is higher cost. Yeah. But they're but but their their willingness to pay and you said potentially up to what per megawatt hour figures I'm hearing somewhere in like the mid $1,000 a megawatt hour versus Bitcoin mining effectively being break even somewhere between $70 a megawatt hour and 150. Yeah.
(1:01:02) What is we were talking at the beginning of this episode about real world examples where in total in terms of all the Bitcoin mining that is in Uricot going from 1.5 gawatt to 1.9 to 2.2 two to somewhere around 4 gawatt today and that flexibility of the load being a value to the system is AI flexible why or why not talk about that in relation to the nature of the the differences in the load it's a good question and I think it's still yet to be determined like Google has put out some white papers talking about load flexibility ility.
(1:01:49) They all know that flexibility is important. They know you can't just be running, you know, 99.99, like they call it the 59s, like 99.59% uptime is what the industry standard for data center uptime was. Um, and if they want to if they want to maintain that, they know that they can't rely on the grid to do so. where we're at because there's an insatiable demand for power.
(1:02:18) uh there's the opportunity you know fork to engage with these conversa like engage these hyperscalers in this conversation like we need some flexibility like how can you build systems to do so and because the GPUs are so expensive and because the capex spend of these data centers is so expensive they're able to add in UPS systems like what's a UPS system um uninterruptible power supply.
(1:02:49) They can even put in grid scale batteries. You can put in estatcoms which helps with like voltage issues. Uh because because their capex spend is so high, they can add reliability. Uh you're effectively saying backup generation. Well, and then I was I was going to get there. And then they also have diesel backup generation, too.
(1:03:13) So like they they have all of these different tools. um that could be used to help reliability. You know, you could switch over to onto your battery in in like a grid scarcity event, right? They're consuming just like us for, you know, most of the time price goes high EA event, something like that. Bitcoin miners are just turning off. Fine, whatever.
(1:03:40) We don't we just don't need to sell our compute into the Bitcoin market. data centers could switch over to their UPS, slowly ramp down what the grid sees. They could then kick on the their backup generation and then get them to like a checkpoint or to where they need to be on say their training model or you know reduce load to a certain extent. like there are tools and a and ways to make all of this AI growth in Texas not an issue on a reliability standard. And that's what like we're trying to do at Choy. What what I'm because Yeah.
(1:04:22) Where I'm getting to is is that a AI data center, right? And everyone throws around the term AI and you know could be chat GBT someone you know midjourney you the end market is people typing in requests to grobt midjourney and operations are happening at a data center and then push back out that that might not be as complex or sensitive as an operation as a um as a foundry working on AS6 or smelter or a hospital, but it is still a source of demand that is more complex.
(1:05:20) And if they were just to go down than the than the thing that's actually paying the,000 gawatt or sorry, $1,000 a megawatt hour for power that that it would be interrupting. And so it's not so much a complex energy problem as it is a service delivery problem. Whereas in Bitcoin miners, they're when when they shut down, the Bitcoin network works perfectly well, right? Because everyone is providing our to one aggregated source of demand versus on the AI side, it it is customers paying for a service. And if you typed into to Grock and you were
(1:06:01) paying for the service and you didn't get response back because the service was down because Texas was having a scarcity event, then you're not going to be willing to pay $1,000 a megawatt hour plus as the end customer. So, it might be possible in the future, but it doesn't seem like the AI data centers are getting near the the the concern trolling that Bitcoin miners do or were.
(1:06:38) And it might actually cause a problem if all of this because I I can understand economically why if if there's 4 gawatts of power in Texas that's being consumed by large flexible loads and maybe not all 4 gawatt large flexible loads that are above 75 megawws but say 3.5 gawatt are if bitcoin min or sorry if AI data centers are willing to pay 10x for the power then the economically rational response to that is to sell your site or sell lease your site however you do it transfer it to an AI data center but then the benefit of having 3.
(1:07:19) 5 gawatt to 4 gawatt of large flexible load that can be hyper responsive to scarcity events in a very direct way goes away. So is that part of the discussion that people are having out there in the market or is it largely not because the the power brokers that be are Amazon, Microsoft, Google, Twitter, Grock. What's the perception of that? You know, I think we don't know.
(1:07:51) We don't know because Abene like the Stargate campus, the 1.2 two gigawatts. Like it's it's still being built. Like there's there is data center load in Texas, but that's traditional data center load. This new um AI compute, it's it's it's not here in any sizable way.
(1:08:14) Uh but you're you're completely right like Bitcoin mining completely pure economic signal like we will respond to the price signal. AI's price signal is a lot higher, right? and they have a different more convoluted equation to like their their payback and like service to their customers and like downtime and all this type of stuff. I think that I think the key is is that load growth is good for Texas because load growth means more investment dollars like it's trillions and trillions of dollars are going to flow into Texas if Texas gets this right.
(1:08:50) The key is flexibility. Like Urka has a position of power at this point. Like they they can they have the best most competitive market and grid system. Permissionless gen can just connect and then manage. We want the load to be here. We want Bitcoin mining to be here because it's a different load profile and it's going to be at a different place. Bitcoin mining it can be two megawws.
(1:09:17) It can be three megawatts. Like you don't need scale to be a profitable Bitcoin mining. These AI data centers, they're looking for 500, 600, 700 megawws plus. Like they have become a whole another beast in in themselves. Like Bitcoin mining actually doesn't need to be that big. And and honestly, maybe explain that.
(1:09:40) Why why does a AI data center need to be that big? It has something to do with like just having shorter networking runs between the whole entire cluster of GPUs. I'm not an expert here but like just close proximity of all the GPUs in one location helps them on their training and so training like what we were talk what you were talking about of like querying gro that's inference um so that's one type of compute GPUs can give the other compute is like training the model that Brock is querying uh and so when you're doing these training runs you want a lot of GPU and um
(1:10:19) a lot of GPU compute and you and you really want it in one location and that's why people are looking at the you know the Irons, the Galaxies, the Riot because there's a lot of light and megawws in one location. There was no other load on the grid that ever requested 600, 800 megawatts, a,000 megawws. Like Bitcoin mining paved the way. Yeah.
(1:10:45) How large was a traditional data? Like a a large traditional data center? 120 megawatts. Right. So there are at least 10 that I know of 300 megawatt sites in Texas. Correct. And so the the Bitcoin miners effectively built sites that could offload from the grid large amounts of power in very dense ways. We paved the way.
(1:11:22) We gave Urkott a stress test and going through the procedure of interconnecting 1 gawatt worth of electrical load. It's compute like we're we're we're doing a different type of compute. It's a shot 2556 hash instead of a flop or whatever AI compute is, but it's it's an electrical load on the system.
(1:11:45) And what we did was pivotal to the future success of our with AI compute. Yeah. And I mean that that makes sense to me in terms of figuring out how large loads of that size and scale which hadn't existed before would interact with a grid under a certain set of conditions with a lot of flexibility and flexibility that was seen in practice. now re-entering a world where there that it might be in theory but not proven out yet and that the concerns over the nature of the large loads that Bitcoin received were largely misplaced because of their flexibility. But it might be the case that with the lack of
(1:12:31) flexibility or at least not having a a model proven out that allows for that flexibility. So, I couldn't imagine a diesel, you know, if there's a 500 megawatt site, having a diesel backup generator that can materially replace a large amount of what might be going on at an AI data center site at any point in time.
(1:13:00) Um and it's not to say that hey there should be an incentive to service all large loads and to incentivize more generation to come online. But you might be looking at a very different load profile because of the economic incentive model for AI companies that differ significantly from Bitcoin companies. How now pivoting now to so we talked about AI you mentioned also batteries Bitcoin mining is a form of demand of power load AI form of load batteries can be both demand and it's not generation it's not actually generating power but it can stores power and can supply power back to the grid. talk about Bitcoin mining
(1:13:55) and how it can be a service to the grid relative to how batteries have a place where they complement each other, what one can do that the other cannot, vice versa, um, and where they potentially compete. Yeah. So, you see now that pretty much any solar farm that is being built is being colllocated with batteries.
(1:14:19) uh batteries help improve the economics of solar farms. Uh Bitcoin mining would do so too. Where the where I see the main difference of Bitcoin mining where before you go into that we had one of your Choya interns. Yes. In here a month or two ago I believe a Texas A&M student. Yeah.
(1:14:44) Robert. Yeah. He was explaining something about why there's a benefit to having a battery colllocated with solar. Not just to have over capacity to be able to serve a consistent amount, but like actually from a technical perspective that there's something about frequency that was a little bit over my head that allows for frequency management by first putting solar to a battery and then connecting the battery to a grid.
(1:15:16) Is that am I wrong there? I could have totally misinterpreted. You are 100% right. like the batteries have such fine nuance to the amount of power that they they can inject that that's why they're taking the lion share of the ancillary market because they respond so well. So yes it is true like like it will smooth out any fluctuations and that's why AI fluctuations in frequency like output generation output okay and so that that's why data centers are also implementing innovative battery solutions cuz sorry to go back to AI real quick but like the inference and the compute it can go up and down and it's Bitcoin mining when we're on we're
(1:15:56) kind of just flat and going for it. uh these training models, they can go up, they can go down. Like it could be a mess. Like it it would absolutely not be a good thing to to sub subject the grid to like instant on, instant off at large loads of 1.2 gawatt plus.
(1:16:17) Um and so they're using batteries to do that, like basically spoof the grid and say like, hey, we're actually just flat. And so I'm assuming the same thing can be done for solar. I don't know the technicalities behind it, but yes, I believe that's what it was. Yeah. Yeah. So like the grid wants, you know, nice and nice and stable. Bitcoin mining nice and stable. Battery output nice and stable.
(1:16:36) Uh AI inference and compute not so stable. But back to back to batteries. Uh the thing about batteries is that they only have a a they're constrained by like how many hours of charge that they can actually charge. And so a battery might only be able to consume power for two hours worth of the day or I think they might be getting to four. can only discharge for four. So, it's got eight hours of total like in andout capacity.
(1:17:03) Bitcoin mining is 247, right? Like we can consume the entire day. You know, if prices, you know, say it's on a shoulder month and it's super windy, super sunny, and prices are $0 the entire day, the battery will have been charged and like stay at the same state of charge the entire time.
(1:17:23) they'll probably in this case bid into the ancillary market um and like provide those like frequency support services whereas Bitcoin if it's $0 the entire day we're going to be blasting like full on monetizing those electrons and so I think the they're both flexible I would say batteries are better at like very very nuanced it's it's electronics right like you And you can set the voltage or set the output to like a a very nuanced degree.
(1:17:58) Bitcoin mining also flexible, maybe not as nuanced, but the the benefit that Bitcoin brings is that you can m you can oversize it considerably and you can run it for a larger amount of time. and explain I didn't fully gro what you were saying about the um the charging the amount of time like what what is a a large battery how large is a large battery first off um battery installations nowadays are I think couple hundred megawws okay there's there's 15 gawatt so 15,000 megawatts worth of batteries inkart right now Wait, repeat that amount.
(1:18:42) 15,000 megawws or 15 gawatt of batteries in Urkot. Would that How much would that have been five years ago? Order of magnitude zero. Okay. Pretty much effectively zero. Uh they've they've come on super strong in the last couple years. And so take a 100 megawatt battery. Yep.
(1:19:10) Is that actually like one just massive battery or is it a site that has it's it's a series of batteries and so like a 100 megawatt battery has 100 megawatt hours. So it's megawws like being able to deliver to the grid and then there's like total capacity. So like maybe it can only inject 100 megawatts at a time but it can hold 200 megawws. So it's a 100 megawatt 2hour battery.
(1:19:33) Okay, I think I follow that. So, if it's got 200 megawatts of capacity, it can take a 100 megawatt charge at any point in time, but then there's a certain number of hours that a 200 megawatt battery could supply say 20 megawatts of power.
(1:20:02) Yeah, I think it's based off of and forgive me for not knowing this, but I think it's based off of the inverter size. Like I don't expect you to be an expert on everything. I'm I'm looking for, you know, general knowledge here. Yeah. I I believe the way it works is that it's it's based off of like the inverter, like how much you can convert from DC to AC and and and send through it.
(1:20:23) So say you have a 400 megawatt pack and you can send 200 megawatt hours through it at a time. That's a 200 megawatt 2hour battery. Got it. And then once it was depleted, it need to be recharged before it can only maximally charge 200 megawatts at a time.
(1:20:46) They could probably go less than that if they wanted to spread it out and provide more even uh charge, but it can only take 400 megawatts total, 200 megawatts an hour. Whereas if you have a, you know, uh 200 megawatt Bitcoin mine, you're consuming 200 megawws for 24 hours, significantly more. you're the utilization of the entire grid is much better on a Bitcoin mine than just exclusively a battery. And then if you have batteries distributed, it's basically got stored power that can that can provide incremental supply to the grid at a point in time. So talk about that.
(1:21:32) So you talked about one circumstance where a battery could in a much more fine-tune balance uh not necessarily the grid but some other demand for power. talk about the scenarios where Bitcoin mining could help balance the market for power or effectively in a broad like at scale versus batteries like what like like conceptual scenarios you know I think the unique thing about both of them is that they're location agnostic like you you have Well, as a as a battery, you are injecting as a generator and like injecting to a they consider batteries generators. Yes, I think they're considered both.
(1:22:36) they get the treatment of both. And so, and like we're getting back into the weeds of Urkott here, but like as a battery, you're injecting at the nodal price. As a load, Bitcoin miner, you're in you're drawing based off of a zonal price. And so, actually, the thing that um works to the battery's favor here is that um the nodes a better signal, right? If you if you aggregate all the lo the nodes together, you get the zone.
(1:23:09) The zone could have How many zones are there in our cut? There's west, north, south, and Houston. Okay. Four. And those are the deregulated zones. Like within those zones, like you have the co-ops and the municipalities that aren't deregulated. Um I said co-ops. Well, anyways, you have those you have those four zones. And so I'll talk about load zone west is where we're located. And I know I know best.
(1:23:36) And and maybe there's there's many nodes in a zone. Yes. Just for some context, even though different zones probably have different number of nodes. How many nodes per zone? Um I believe each generator will create a node. Uh, so Load Zone West for example, I'm pretty sure there's got to be 50 to 100 nodes and the the nodes themselves will have a will have a price point and then the aggregation of those nodes will create your zonal price that your load responds to.
(1:24:16) Okay. Cuz yeah, before you had made some comparison between nodal pricing and zone pricing. Now reconnect that to the idea of batteries, how they might benefit from one or the other. Sure. Like the for example deep in deep deep west Texas talking like Pis for Stockton area um a generator could trip or it could it just couldn't it might not be windy and so that deep west node will get blown out. It'll go to 5 thou 500 bucks a megawatt hour.
(1:24:54) Uh and then based off of that high price, the zonal price for the load increases, but it might not actually reflect the electric like the electric grid conditions on the eastern part of the zone in Abalene, right? You're 400 miles away, multiple multiple buses away, like they're not very electrically connected.
(1:25:19) And so where batteries are nice in this situation is that they operate on the node. And so by operating on the node, you get a clearer price signal. But to be fair or to to circle around, Bitcoin mining can op like loads can operate on nodes too to get better price signals. It just requires uh qualification to become a controllable load resource.
(1:25:44) This controllable load resource allows you to operate based off of nodal conditions once you qualify uh with OT's conditions. Um and then at that point like Bitcoin mining truly is like an apex predator for responding to grid conditions because you have your node that you're on your your most electrically close node.
(1:26:11) If you're responding to the prices and conditions at that node, that is the the clearest signal for scarcity or abundance that there is. And so if prices are cheap, there's abundance of electricity and you're consuming and you're consuming price gets blown out just at your node and you can turn off that helps like spread spread it back out and like reduce that node's um blowout.
(1:26:35) And then that improves the prices for every single person in that zone because not everybody can be a CLR. And so if I'm thinking about this correctly, if a generator trips, then either a Bitcoin mine could come down if it caused prices to spike or a battery could replace that power or both. Or both or combination. Yeah.
(1:27:10) It's not mutually exclusive like that they can both respond to the the proper price signals or as demand is increasing uh a battery could provide more power where a bit you know often not often times there are people that will say bitcoin is a battery my view it's a bad analogy because it can't provide incremental power to the market correct it can turn down and allow a generator that was providing it it power to have that power go somewhere else but can't replace the power right so it's that if you need more power or need more generation a a battery could provide that more efficiently where a Bitcoin miner could
(1:27:56) not yeah just for two hours right but the Bitcoin miner could stay off as long as the economic signal signals that the generation asset has like stayed tripped like some type of issue. And so it might be the case where and I'm not saying in a specific circumstance, but a a battery might provide the first relief to price signals, but then if it's needed for longer, the Bitcoin miner would be more responsive.
(1:28:30) I think it would be, you know, depending on the price of of power, right? I think they would both respond to the price. Um but Bitcoin like the battery is capped to its level of response. Although it is you know it is injecting right it is providing that power support. Bitcoin mining can stay off for longer. Like another another really good example um of this was this was this summer.
(1:28:55) I can't remember the month but prices the batteries discharged for the solar ramp in the evening in the afternoon as the sun batteries discharged injected into the grid like they sent power into the grid as the sun was setting and solar was coming off of its its ramp. And so for those 2 hours 3 hours batteries were injecting prices were maybe 120 150 bucks a megawatt hour 300 whatever it was.
(1:29:27) um overnight it wasn't windy and so prices stayed in that maybe $80 to $100 a megawatt hour range which is significantly elevated versus where which is elevated comparatively. Yeah. And then in the morning there was another peak like there was a there was a morning peak of demand. The batteries had not charged because of the that $80 to $100 price range.
(1:29:53) And as it peaked to maybe $200 a megawatt hour, the batteries were sitting there like twiddling their thumbs like, "Oh, we're out of capacity. There's no discharge." Whereas Bitcoin mining, right, you're off at that solar shoulder.
(1:30:11) And then as long as your break even is like you got some newer efficiency machines at 120, you're soaking up all that electricity at night. And then when that peak goes to 200 bucks, Bitcoin responded. And so we have a we have that ability to always respond. Batteries have to worry about their state of charge and it's it's more of a guessing game. It's less guaranteed.
(1:30:37) So they they they can both be compliments and they can both be responding at the same time and be or you could think about that as being competitive to how they're providing or how they're responding to price signals. You know, like Urkan needs everything. We need gas, we need solar, we need batteries, we need wind.
(1:30:56) Like the more it grows, the more load grows, the better Texas does. Um, you know, batteries provide things like like voltage uh ride through support that electrical loads can't do. Like it's all going to work together. And because we're in an island system, a variety is key. Like it's and you mentioned batteries increasingly being colllocated with solar.
(1:31:21) Are are most batteries colloccated with some form of generation or do they do they typically I mean you want to put it next to intermittent generation right because if your gen stack is built for if you have a one gigawatt interconnect and you size your nack gas generation to one gigawatt like you couldn't inject any more than that one gigawatt so it wouldn't really make sense to charge your battery if you're just using a gas peaker plant where it does make sense is that you're generating your one gigawatt solar
(1:31:52) plant. You put one gigawatts of batteries. You charge during your um you know your did I say solar or wind? Uh solar solar. You charge during your your sunny sunny time and then you have one gigawatt worth of capacity to sell on those times where you literally can't be injecting to the grid when it's in in the evening time.
(1:32:18) Um and then when you if you talk about not you but just if we look at the landscape from yeah somewhere between 2017 and 2019 Gideon and Choya went out and from my knowledge built the first green field substation that was 50 to 100 megawatts ultimately to 100 megawatts in terms of a phase, but that was the first green field substation for Bitcoin mining.
(1:32:55) Virtually there was there was Bitcoin mining on the air grid in 2020. But in terms of getting to 4 gawatt today, five six years ago, it was it was very dimminimous. Similar with batteries. You said it was something like 15 gigawatts now. A day of of battery power. So, a lot has changed over the last 5 years.
(1:33:27) If we look 5 years into the future, specifically on the Bitcoin mining side, where do you see the scale going? And where is Chao most focused today in terms of participating in how you guys see the market changing? I'll hit on Bitcoin mining like I Bitcoin mining is a unique load profile to AI compute that that we are competing for power against.
(1:34:01) I do think that you're going to have less of these mega miners, hundreds of megawws, and you're going to have more distributed 50, you know, maybe even sub 75 to avoid the large load classification. And then you're just opportunistically citing these around areas that have an excess of power generation. You're going to have Bitcoin mining behind the meter at wind farms to that are just taking a putting like a floor PPA on that wind farm helping to monifi monetize the excess energy there and then just dealing with like a 60 or 70% uptime.
(1:34:34) I think the days of the you know one gigawatt Bitcoin mining uh ventures or at least in Texas are probably over. We just can't command that premium. Like you could take a one gigawatt interconnect and sell it to a hyperscaler. Of course, this is all like given the data that I'm I'm seeing now with AI like is a bubble like we're not going to get into that.
(1:35:05) Like like will things change? Who knows? But if it's on the current trajectory, I think that Bitcoin is going to just continue to be like the pioneering species. Like we're going to go colllocate next to the intermittent generation. we're going to go colllocate um you know wherever these large data centers don't want to go. Um, and then how Choya wants to position itself, you know, like like you were saying, Gideon Gideon saw this flexible load like monetization back in 2017 2018 and and built that that specuilt Ottawan substation in uh in PAIO. And then just everything that happened the last eight years was a confirmation of like what
(1:35:43) what he was talking about. Like you have the mecca of energy in West Texas. You've got oil and gas, the most prolific field in the world. You've got wind and you've got solar. You probably have geothermal, too, but like hasn't really been commercialized, but you have so much energy right there.
(1:36:01) And like if you can respond to the prices, which was the thesis with Bitcoin mining, you can capitalize on it. Load Zone West, where Gideon first um built that substation and and sold that project was the start of the West Load Zone tripling in size over the last eight years. Like I'll say right here, like he started that. Yeah.
(1:36:28) Um of course there's some oil and gas load in there too, but we're also an oil and gas company, so we'll uh we'll we'll put our head into that too. um where Choya sees opportunity like what I do at Choya is is um is run our innovation lab where we're we take low serial number units and uh and test it out we'll take on the we'll take on the technology risk and so with all these AI data centers coming onto the grid like are we going to go like is off-grid the solution like and you know is it the traditional off-grid is it like flare gas mining is it putting n gas you know turbines on a pipeline and creating your own your own energy or is it some combination of
(1:37:08) uh solar, batteries, and gas? Because solar and batteries, the cost curves are just continuing to go down. They're they're being built as consumer electronics. Like we all know technology stacks and electronics price trends down over time. Uh and it's they're just going to become more and more competitive.
(1:37:34) So we can we can imagine a world where uh you could have massive off-grid solar battery farms powering Bitcoin mining will be Bitcoin mining at first. No, of course not. Like it's going to be AI compute first because they can they can they're generating a higher dollar per megawatt hour basis. So the unit economics work better for them.
(1:37:57) Um where Choy is participating right now is like we've we've got expertise in the oil and gas side, the land side and the um electrical side and are trying to speed things up in our like it's I talked about it earlier like we see it as a matter of national security in order to have as much AI compute in the United States as possible. And the more that comes to Texas, the more benefits stakeholders.
(1:38:28) So our our focus is accelerate that in any way possible. Gideon was super involved at the legislative last uh last year lobbying for flexible load and using Bitcoin as an example to basically troll these AI companies like, "Hey, we can do this. Y'all should figure it out, too, because we've got 4 gigawatts and we're turning off and like sending that power back to families and homes.
(1:38:56) Y'all can't tell us that you're too important to not do so. And so, long way to say like we're we're involved in all all things energy, power, uh, and just excited for the the future of Texas and and how much it's going to grow and how much it's going to benefit all of us. Well, when you mentioned that you guys view more AI demand as a matter of national security, I was going to say, are you talking about Texas or are you talking about the United States? And then um is more Bitcoin mining on that same par? Why? And and this is last question
(1:39:36) to wrap up and then also want you to share where people can find you if they're interested in what you're doing in the innovation lab. or outside that um where they can find Brad Cuddy. You know, of course it's good to have AI compute in the Republic of Texas. Uh but overarchingly in the United States, having this compute and owning this compute is important as like we are obviously competing against China stateowned uh utilities, stateowned generation, they can just build transmission. They can just build generation as much as they want. and they can put old chips on and
(1:40:10) run these models like it is their model versus us like will America's will to innovate the capitalism structure that incentivizes growth and innovation and you know thinking outside the box and allowing entrepreneurship will it win I don't know I hope so I believe so but how do we ensure that they are like we do what we can to make it access to electrons which is the input to all this compute. That is like our northstar uh at Choya.
(1:40:49) And then for Bitcoin mining, of course, I want as much Bitcoin produced in the United States as possible. Uh because I want Americans to prosper from energy back freedom money. I can I can see a see a world is like as AI continues to um gobble up jobs maybe their a AI agents start transacting on with each other like Bitcoin Bitcoin will be a part of this and like we we all know it um how do we make sure it's a part of it so one on the Bitcoin mining side is like what what I'm trying to do uh we are a complement to the grid we're important for OT, like we're here to stay. Um, we're not competing against
(1:41:35) AI. It's it's it's a it's a different class at this point. Um, but of course decentralization, like not all not all Bitcoin money needs to go to Texas. Like it it's a pioneering species. It should go where it's needed. Bhutan, great example. My favorite one.
(1:41:54) like the the government of Bhutan having 12,000 Bitcoin on their balance sheet because they they said yes to Bit Deer mining on their stranded hydro is the coolest thing ever. Um but long live Burkott, long live Texas. And then you can uh you can find me at uh I think it's Brad Cuddy on Twitter, LinkedIn too. I got a pirate flag in Laser Eyes, so pretty easy to find. Uh but really appreciate it, Parker.
(1:42:18) Yeah, appreciate you coming on running the innovation lab at Choya Inc. In many ways, Urkott at great scale is an innovation lab for the rest of the nation, for the world to to pay attention to. So, appreciate all that you're doing individually that Troy is doing and thank you for coming on the show. Glad to have you in Austin. Great to be here. All right. Thanks, Parker. Yep.
