How Bitcoin can support the grid with Jamie McAvity (CEO @ Cormint)

It's not a coincidence that West Texas is is simultaneously one of the nationwide leaders in curtailed renewable energy and the fastest growing Bitcoin mining and and battery jurisdiction altogether, you know, the over the last five years, there's been almost no base generation base reliable, always online generation added to Ercot.

There's been tremendous load growth. Almost all of that load growth has been met by intermittent Generation installation. So solar and wound.

Hello, and welcome back to transmission. Today's episode is with Jamie Mcavity, CEO at Cormant.

The conversation covers how Bitcoin mining can be used to support the grid and why West Texas, the curtailment capital of the US. Is perfect for both Bitcoin and batteries. Hit subscribe so you never miss an episode. And if there's a topic you'd like to hear discussed, please get in touch. We'd love to hear from you. With that, let's jump in.

Good morning, Jamie. Thanks for calling on a podcast.

Good morning to you. Thank you for having me.

This is gonna be a lot of fun. It feels now like battery energy storage and grid scale Bitcoin mining, those two asset classes are inextricably linked in Ercot. You can't understand one without really a knowledge and understanding of the other. And to have you on and tell us everything that's happening in in in that world is gonna be fascinating today. So thank you. Before we get started, Can you just explain who you are and who's Cormint or what what's Cormint?

Yeah. Sure. So my name is Jamie Mackivity.

Most people butcher the pronunciation of my last name, but the that's the correct pronunciation.

The incorrect pronunciation is, Macavity, like the mystery cat from a musical cats, which I'm sure you guys are familiar with being from the UK. So I I started my career in, energy futures, energy derivatives, I was a floor trader on the floor of the New York Merc exchange, which was bought by the CME.

After about eight years, commodity day trading, and market making, I you're in for a more peaceful life with not sixteen hours of market activity, Sunday through Friday. So, I retired from the energy industry And I moved into technology. For five or six years, I I built a startup company that was focused on the apartment industry, which was, much less fast paced and had very little to do with markets. It was it was a great experience, and I learned a lot about company building and startup building during that time.

But I realized that the markets and and the energy markets were the place where I wanted to spend my career during that that startup period in around twenty thirteen. I discovered Bitcoin and started investing in it and learning in it. And then in two thousand eighteen, my three co founders and I started, Cormant, which is a Bitcoin mining company, but we have a history of mining just about any different type of of cryptocurrency that you can imagine. And we are currently headquartered in West Texas.

We only do business in West Texas, and Not most people don't realize this, but West Texas is the fastest growing renewable energy jurisdiction in the entire world. So It's a great place to access cheap power, and it's a it's a great place to be a Bitcoin miner.

And, To to frame this conversation, we're gonna talk a lot about Fort's Fort Stockton. So so what's Fort Stockton apart from a place? And why is it so special to you?

Yeah. Well, Fort Stockton is a city within a county that's called Pecos County. And Fort Stockton is the nationwide capital in curtailment of renewable energy.

This is a twenty twenty two number. I don't have twenty twenty three yet, but twenty twenty two, there were over a million megawatt hours of renewable energy that were curtailed Wow. In Pecos County. So it is it is the capital of stranded renewable power.

You could think of it like that. And the reason why it's like that is there so Fort Pecos County is very close to the Midland Odessa area of Texas, which is the the kind of center of the Permian Basin oil industry. So there's a ton of oil. There's a ton of natural gas.

There's a lot of industry that is working on extracting those commodities in that region.

Pakers County is just south of that, and it's kinda like the the ugly stepchild of the family, unfortunately. In terms of minerals, it's a very beautiful place, and obviously has redeeming qualities for other industries, but it doesn't have any minerals. So or it has very, very little minerals compared to those other counties. So the land there is very cheap. It is a desert like region. So it's it's got extremely robust solar generating capabilities.

And it's also very, very windy because it's a it's a long flat plane area. And then there are the the topographical features are that they're these high mesas that rise up out of these long flat planes acting as an accelerant for wind power. And so within Pakers County, there is a tremendous amount of solar and, and wind that is installed. And that that has been chasing federal production tax credits about the last fifteen years.

So it's it's really exploded in growth. And, yeah, now, you could say the industry is slightly overbuilt. And so as is kind of a law of economics, cheap energy, attracts businesses that thrive on cheap energy. So now there's a number of other industries popping up there like Bitcoin mine and, and data centers.

And let I wanna talk about negative pricing for a second. So there's a lot of negative pricing there, but two factors to this question. So firstly, why is Texas such a good place for Bitcoin mining? And then on negative pricing, could you just, explain that? Cause it might sound a bit crazy to to some folks, why would prices go negative?

Yeah. Sure. Well, Texas is a great place to do business in general. Probably one of the best places to do business.

In the world because it has a very strong historical commitment to free markets and favorable regulation. The regulatory environment there is incredible. The regulators are there to help businesses grow. Not they're not there to enact a particular agenda.

And and if they are there to enact an agenda, it's to support a free market. So excellent regulatory climate, no state income tax, very favorable development conditions, the labor market is really strong. It's it just couldn't be a better place. We're coming from operating in upstate, New York, and New York state is not a great place to build a business.

Especially a Bitcoin business.

So Texas is great. West Texas has a lot of, of renewable energy, ninety two percent of the renewable or the generation capacity installed in West Texas is renewable.

So it's it is one of the most renewable grids in the entire world by region, if not the most. And The reason why we have negative pricing there is because mainly wind power, but now also solar is is capable of receiving production tax credits, federal production tax credits for renewable energy, which is a twenty seven dollar a megawatt hour credit that you receive from the government if you generate a megawatt hour of renewable energy. And If let's just look at the case of wind, for example. Wind's capacity factor in this part of the United States is about thirty to thirty five percent.

So one megawatt of installed wind turbines generates a roughly twenty nine hundred megawatt hours per year. If you get a thirty dollar production tax credit just below thirty dollar production tax credit on that, that's a hundred grand a year in tax credits. And the tax credits last ten years. So you're earning a million dollars in tax credits over a ten year period for generating wind energy and the cost to build one megawatt of wind power is about a million dollars.

So effectively, the entirety of wind projects in this part of West Texas similar conditions like this are in Oklahoma, Western Oklahoma, the entirety of the project is paid for by tax credits. So the what's called the tax equity investor is the investor who puts in capital to the project upfront. And then they receive the tax credits. They receive the depreciation.

They're basically an investor in the project mainly for its positive tax benefits, which is an income tax credit or or production tax credit, and then they get a bunch of depreciation as well. So it just goes to offset other income, other where other in other places in their investment portfolio.

That investor really drives the operating agreement of the project. So that investor says I don't care if the price of energy is negative five dollars a megawatt hour. I don't care if it's negative ten dollars a megawatt hour. I care that my production tax credits get generated.

And so the operating agreements for a lot of these wind farms explicitly state that the wind farm must generate down to negative pricing. You know, as far as negative twenty six dollars a megawatt hour, because the tax credit is negative twenty seven dollars a megawatt hour. So they are the the dominant party and investor in these deals. And effectively, you have all of this wind power out there that has an incentive to not shut off their generation, to knock curtail generation down to negative twenty six dollars, and the market will continue to pay people to take power or drive drive the the LMPs and settlement prices to go further and further negative so that some generator does shut off. So it's kind of like this There's no incentive for anybody to shut off or they legally can't based on their operating agreement.

There's there's something sim similar in, great Britain with subsidies for wind farms, especially in Scotland when on a particularly windy day, you can't get all the power from Scotland down to south where the load is. And so because of the subsidies, you have negative pricing, and it really skews the market But for folks like you who are major loads on the network, this is fantastic, right, because you get paid to take power. Let's just talk about that a second. The the project that you've got over there, can you put some numbers around it? Do you wanna give us the overview of that project? What's the story there?

Sure. Yeah. It it's actually a really interesting story. So we met a wind farm owner in late twenty twenty, and their wind farm was built in two thousand and eight.

So the the ten years of tax credits had expired. And they were effectively losing money because they were competing against all these other wind farms who did still have their tax credits, and they were looking for a creative solution to revitalize the asset or if they couldn't successfully do that, they were gonna just decommission it. And so they eventually made the decision to decommission it. We bought the decommissioned wind farm from them, which meant all of the turbines were taken down It was it spanned over ten thousand acres.

All the turbines were taken down. And what remained was the substation and a private transmission line. So hundred and thirty eight KV transmission line, and a hundred and seventy five megawatt substation remained in place. We effectively bought those assets and then we converted it into a data center.

So right now, we're energizing load that will bring us up to sixty megawatts of around the clock load.

Wow.

And we're by the end of this year, we'll be at a hundred and twenty megawatts.

Our business model is It I mean, it's it's relatively simple, but there's complexity in operating it, which is simply that we're just a real time market, price taker, and When there are periods of excess solar or excess wind, usually our Bitcoin mine is humming away. About ten percent of the time, we're being paid to take power about sixty five percent of the time, the cost that we pay for powers below two cents a kilowatt hour.

But ten percent of the year were offline completely. So our capacity factor is ninety percent. It is variable. It's not based on wind speeds or photovoltaic output or anything like that. It's just based on the load zone price of electricity. So our Bitcoin mining equipment can power down in seconds in response to changes in the load zone price of electricity. And that's basically what our model is.

We consume so long as prices are cheap and when prices are expensive, we power down the entire mine.

So let's just talk about shape of that for a second. So for generators or, you know, a a lot of assets on the grid think about ramp rates And you mentioned seconds there. So a Bitcoin mind, does it look like a big square wave? Are you basically on or off your full power or zero.

Is that how the maths works out in the if if it's worth you running, you might as well run at full base load if you like. And, how long does it take to switch on and off? And, what are the other considerations? Because I know you've got perhaps we should talk about this in a second, but you have Bitcoin mining, but you also have calling systems.

You have ancillary systems. There's a lot going on there engineering wise. Could you just talk to that for a second?

Yeah. Good question. So right now, just based on where Bitcoin mining revenues are expressed in dollars per megawatt hour. You are correct.

Your intuition is correct that we are either on or off. But there is a curve. And the reason why there's a curve is because Bitcoin mining equipment, it becomes more efficient the the fewer watts that you run through it. So the the standard wattage of our machines that we're running there is about thirty five hundred watts.

You can run them as high as four thousand watts. They become slightly less efficient there. You can run them as low as twenty two hundred watts, and they become more efficient there. And what that actually mathematically equates to is that the high efficiency mode has a a dollars per megawatt hour break break even.

That's slightly lower than the the medium efficiency, and the medium efficiency is slightly lower than the low efficiency. So there is a curve but it's not really in play now because the curve is between seventy dollars a megawatt hour and a hundred dollars a megawatt hour. And you just don't see a lot of electric see pricing land in that area. If it were down closer to where the most commonly occurring intervals were, which I would say would be between fifteen and and forty dollars a megawatt hour, it would make sense to to be more operating on that curve.

And and that's probably what the business will look like at least for some period of time in the future.

So is what you're saying? Because power is so cheap in that region, most of the time, you you don't have to do much optimization around it. You just you just run full pout And then as over time power prices will change, there is there is room for optimization around power prices. But at the moment, the a difference between your operating costs and the power price or your your short run marginal cost of a Bitcoin minor is so far in the merit order that you just run.

Yes. In this in this specific market environment, that is the case. There's not much efficiency tuning or or wattage tuning to target specific efficiencies and breakevens, that we do right now. But in the future, I I predict that that will happen. Most of the optimization that is done would be optimizing in the ancillary service market doing day ahead versus real time. Optimization, optimizing a hedge, against the, you know, the the realized, day ahead prices or real time prices And, lastly, congestion and transmission optimization.

So the as far as the intraday, it's it's it's relatively simple on or off.

But then in the surrounding markets, there's a a lot of opportunities to monetize the curtailability of the load. I mean, the load is it there's it's unlike any other load that exists in a in a grid because you can power down ninety five percent of the load in seconds. You can power it back up in seconds and so in some cases, it's actually a bit too fast because if you're a grid operator, you'd prefer to have loads and generation matching each other within the the dispatch software intercut. It's called SkED, and the Bitcoin mining load is a bit too quick for that. But work pretty closely with the regulators, and we're actively working on optimizing the the system so that the Bitcoin miners work really, really well with the system operations team and actually, you know, improve reliability over the long run.

Before we go down the rabbit hole of Bitcoin mining and its contribution to the grid. Just, like, we should probably set some ground rules, which is that we're not gonna go down. We're not we're not gonna talk much about you know, Bitcoin versus other currencies or any of that stuff. I think we by having this conversation, we have to assume that we're interested in that and we're gonna leave that alone.

We're more interested in grid and the contribution that Bitcoin miners make to the grid. Before we get there though, can you just talk about what's a Bitcoin miner looks like for folks who haven't seen these things. What what what equipment is there on-site? Is it in a big building?

Is it tall? Is it short? Is it underground? You know, what what other systems are there?

What how long do they take to build? Can you give us a quick overview of that?

Yeah. Absolutely. So, a Bitcoin mining computer looks like a shoebox.

It does not look like a desktop tower or a a laptop, it's the right way to think of a Bitcoin mind and computer is effectively like a, you know, the engine of of a muscle car, where it is designed to do one computation.

So the a Bitcoin mining chip is called an ASIC, which stands for application specific integrated circuit. It literally means it's a very dumb chip. It can't do, thousands of applications, like your regular CPU and GPU combinations in your in your computer can do. It can only do this one algorithm over and over again, which is called the shot two fifty six algorithm algorithm. That's the algorithm that it Bitcoin is organized around for its mining process. And the way it's optimized is actually the the gates, the physical gates on the board on the circuit board are organized in such a way that it can perform this computation as efficiently as possible. So it's orders of magnitude more efficient than a a CPU or GPU at performing the specific computation.

The rest of the unit you know, in addition to this very dumb specific use chip is designed to move as much airflow through the machine as possible because the muscle car analogy that I made. I use that because in a muscle car, you're trying to dump all this fuel into the engine and and produce as much combustion as possible. In Bitcoin mining, you're trying to jam as many watts through this circuit board as possible because each watt that you push through produces a corresponding amount of Bitcoin a fraction of a Bitcoin.

And so the name of the game for being very, very good at Bitcoin mining means having excellent cooling. So most Bitcoin miners, their facilities have massive auxiliary fans that support the the machine specific fans a lot of Bitcoin miners remove the fans in their entirety and actually submerge the miners into a non conductive hydrocarbon base fluid, which is pumped through the machine rather than using air to cool the chips. And the reason why they do that is because A fluid coats one hundred percent of the surface area of a chip. And so it's it's capabilities in dissipating heat are much more effective than air. The final frontier for our industry is water cooling.

Water cooling, water is is five times more effective as a thermal conductor.

Than oil, meaning it can absorb heat five times better. And if you can incorporate water cooling into computer operations, your ability to remove heat from a chip becomes greatly improved.

But with water, then you're entering into condensation issues, freezing issues, you know, you're using a much more delicate form of coolant. And so it introduces all these catastrophic risk into the business if you use water. And the reason why it's moving in that direction is because As long as your computer chips are operating at sixty degrees Celsius, you can push as many watts through them as possible. So this this muscle car esque feature of the Bitcoin mining industry where there's a zero zeroed in focus on cooling, is really you know, about optimizing economic outcomes.

So I imagine it's like if you're a gas generator, more efficient gas generators get more run hours or more margin, than less efficient gas generators. And I expect it's the same for Bitcoin miners. There is an incentive to become as as efficient as possible because as you say getting more watts through that system creates more economic outcome for you.

Definitely. Yeah. I mean, that's the name of the game. The name of the game is, like, like other commodity production How how cheaply can you build the means of extracting the commodity? Which would be how cheaply can you build data center infrastructure? You know, electricity transformation, infrastructure, and cooling infrastructure, and network infrastructure. Those would be the three main pillars of data center infrastructure.

Then the servers themselves, you have to pay a cost effective price for those.

And then the actual performance of the machines and the maintenance of machines. The so all of those disciplines, they come together to make, you know, a Bitcoin mining firm good or bad.

And the Bitcoin mining community in Texas or the folks who are connected to Ercot, you said for Fort Stockton project is about sixty megawatts at the moment. Gonna be a hundred and twenty soon. This is a serious kit. That's like kind of an open cycle gas turbine sort of size. How big is a Bitcoin mining community in in in ERCot? And what what's next?

Yeah. So in Ercot, we have about, two point five gigawatts of Bitcoin mining load in total relative to system wide peak load last summer.

Which was eighty four gigawatts.

So that's roughly three percent of the peak load is Bitcoin mining. What's interesting is that Bitcoin mining really most likely does not contribute to peak load. So, it's more the, probably, the better measurement for it is against the the min load, at any time. And, Yeah.

I think we have reached the point for the grid where this the grid operator is beginning to become a little bit more cautious about the the quantum of Bitcoin mining load that is on the system, and they understand it very well. Now there's a regulatory framework in place to Parn is the benefits of Bitcoin mining, which would be its predictability, its controllability, and, obviously, the price signal that it sends in the market as, you know, we'll probably talk about it later. It's the same as batteries. It buys cheap power, and then it it adds to reliability by either discharging the battery in the case of the battery or curtailing the minor mining load in the case of the mining load.

But Two point five gigawatts. That's a lot. There's there's potentially more coming. I think there's something like twenty five gigawatts in the interconnection queue.

This question gets asked a lot, is that all gonna come online?

Twenty five gigawatts of minors?

It's not clear if it's all minors, they don't they don't delineate between which users, but there was definitely a mad rush to, request capacity in Ercot over the last three or four years. And Total global Bitcoin mining capacity is about fourteen or fifteen gigawatts. So if Ercot alone were to add twenty five gigawatts of mining, that would increase the the footprint of the entire network by, hundred and sixty percent plus or minus. And if that were to happen, almost every Bitcoin miner on Earth would become unprofitable because it's a it's a game of relativity. So that's not gonna happen, and, workouts doing a good job of, of slowing it down a little bit, but still being very constructive on the regulatory front.

Two and a half gigawatts of Bitcoin minus. So two and a half out of the fourteen total.

It's a it's a I'm surprised. Well, I mean, I must say here my bias is I'm, a big fan of Bitcoin and the the whole concept. And you'd think that we're at the point where nation states see it as a a point of national importance to have Bitcoin money on their home turf. I mean, it's it's almost like a security issue.

This thing is not going away. And actually can, in my opinion, and, sure many of our listeners can can reap many, many benefits for society. The last thing you want is all of that being, mind on another nation's turf. So terrific, really, for the US, they have this massive, massive Bitcoin community in Texas and it's growing so quickly.

A lot of people we're gonna talk about batteries in Bitcoin now because they're often in the same bucket as a Venn diagram where people often put a lot a lot of overlap between batteries in Bitcoin. And parts of this are actually quite contentious.

So could you just talk for a second about how you think about batteries, batteries and Bitcoin being in the same universe, and then some strengths and differences of each Mhmm.

Yeah. Definitely. I mean, it's not a coincidence that West Texas is is simultaneously one of the nationwide leaders in curtailed renewable energy and the fastest growing Bitcoin mining and and battery jurisdiction altogether, you know, that what you are seeing with increasingly intermittent renewable dominated grids, you know, just as a as a data point here. Over the last five years, there's been almost no base generation, base reliable, always online generation added to Ercot.

There's been tremendous load growth. Almost all of that load growth has been met by intermittent generation installations. So solar and wind. And What you're seeing is that pretty much the our exact consumption shape, ninety percent of the time, power is very, very cheap. And and abundant. Ninety percent of the time powers below three cents a kilowatt hour. Our numbers were two point seven cents a kilowatt hour at a ninety percent capacity in twenty twenty three.

Just as as kind of a data point is So just for that context for a European listeners, that's probably about half or less than half the wholesale cost of power in Europe.

Right. And it it that's we are about half of the around the clock wholesale power cost intercut. So the around the clock for one full year, wholesale power cost intercut is five and a half cents. So we're about exactly half of that. And so think about it like this. Ninety percent of the time contributes to half of the cost of, of one year, and then the remaining ten percent of the time makes up the other half. So so that remaining ten percent of the time is exploding in price because there has not been responsive generation built that can ramp up to respond to high prices.

Everything about Ercot feels like it's about long tail distributions. It just feels that that this whole system is is like that. A few days you get all the action or, a few regions get, huge spreads or, you know, it's it just feels that way.

It it is that way. You're you're absolutely correct.

The if you look at summer of twenty twenty three, for example, natural gas prices were relatively low. Natural gas prices are now on their multi decade lows. So primarily, in over the last few decades, the price of natural gas was the the primary input in determining where the cost of power was gonna be when most of these grids were were powered by natural gas plants.

In the summer of twenty twenty three, in a relatively low gas environment, we had of the top eleven months, and I say, top eleven because one of them was number eleven.

Three months from twenty twenty three, contributed to the top eleven around the clock monthly prices in Ercot history. So twenty twenty three contributed three of the top eleven going back, you know, to the record books from all time. So you're seeing that power prices, and it was a record hot summer. So we take it with a grain of salt, but power prices are going up and they're being driven by this ten percent of time window, which is usually during the summer.

Occasionally, it could be during the winter. You know, summer peaks would be afternoon, winter peaks would be the mornings. And it's all hours ending eighteen, nineteen, twenty, and twenty one. So it is when the sun goes down that you see this record pricing, and the prices were astronomical.

I mean, those hours were averaging in the twenty two to seventy cents per kilowatt hour range. Twenty two hundred to seven hundred dollars per megawatt hour range. For the entirety of the month of August, and good chunks of June, July, and September.

And Our battery revenue index. We we we've run indices on the performance of batteries in a number of places, but there are all of our indices for Ecot basically broke our graphs in summer. It was just it was in incredible. Though it's just out of this world.

Yeah. I mean, they did great. That was Bitcoin miners and batteries are both uniquely capable of responding to volatility in different ways. You know, Bitcoin miners can by a power hedge and then curtail their load in response to high prices, and they can collect the difference. Batteries can charge during cheap hours and charge during expensive hours. And so the the rapid decline of solar output starting around four or five PM it creates this this very time specific volatility window where you're losing fifteen thousand megawatt of generation.

Very suddenly, it's extremely hot. Everyone's cranking their air conditioning, and somebody's gotta make up the difference. So you have all these loads coming offline, and you have all these batteries discharging, you have peeker plants spinning up, and it just happens so quickly that the price volatility is usually enormous.

You just have this almost vertical net load ramp, which, I mean, the controller engineers must must just must dread it.

When it comes around, you know, it's almost dinner time, and it's I know.

They're thinking a bit crazy. So so let's talk about the the Bitcoin camp and the battery camp because there's been to me, it seems pretty straightforward that all these folks who are operating in the same pool some Bitcoin mines can provide some answer research. Well, we'll talk about that in a second, but a lot a lot of the characteristics of a Bitcoin mine are very similar to a battery. Yet there seems to be just that the it hasn't all been that smooth running between the two camps. So what's going on there?

Well, I mean, both both of these market participant types have the ability to be long volatility in either direction. You know, a Bitcoin minor that's unhedged benefits from persistent periods of of zero dollar or negatively priced electricity, that's when a battery is is most likely trying to charge is to have no input cost on their power. The same token, Bitcoin mining loads are coming offline when batteries would be most likely to discharge. So they're, you know, it's it's effectively like we're on the same side of the market, but providing a very not a very different, but a somewhat different market behavior type where batteries are consuming load.

Bitcoin mines are consuming load when prices are cheap, and batteries are actually putting more generation onto the system when prices are high. Whereas Bitcoin mines are reducing load. And so they are competitive. There's there's plenty of, of chicken to go around the dinner table.

So to speak in terms of break that down for a second.

So if if Bitcoin minds are taking cheap power, but then they're sort of nibbling away as load against negative pricing or very low pricing. What that does, the more Bitcoin manager technically actually reduces spreads. On the bottom side of the spread, right, on the on the low side, which I guess I'm not saying that anyone in the battery community is as cynical as this, but in practical terms, what it does mean is that the more bitcoin miners on the system, the less negative pricing or less low pricing there is for batteries to access as part of the spreads that they need for their business case.

That is that is correct. And, by the same token, you know, the more negative pricing, there is the less of an incentive there would be for renewable generation projects to be underwritten. So if you think about the market as a big pie, then clearly, we have lots of very, very cheap zero dollar and negative power that needs to be consumed. We've got federal tax incentives that are saying, build me more renewable generation, do whatever you can to build this.

And then you have these incentives for different market participants who can respond to that volatility and profit from it to to build. And I think that it's definitely true that batteries in Bitcoin compete in in a properly function elect properly functioning electricity market, you there shouldn't be any discrimination between different types of market participants Bitcoin miners and Batteries are both helping the situation by contributing to the incentive for generators to build and respond to these tax credits that are have been determined by the voters to be something they want politicians to be going after.

So it is that's just the nature of it is that these volatility harnessing market participants are thriving in this now high volatility power market environment.

And what what do you see as the the Nirvana, if you like, of renewables and Bitcoin mining and batteries and, you know, all of these future energy system technologies working together. There's a few ideas about what that might look like. What what's how do you think about that?

Yeah. I mean, I think the market is is sleeping right now on the excellent overlap of Bitcoin mining loads with intermittent renewables.

You know, you have right now, low end Bitcoin mining equipment produces about eighty dollars a megawatt hour in equivalent revenue. High end Bitcoin mining equipment produces about two hundred dollars a megawatt hour. If if you had a Bitcoin money data center collocated with a renewable plant, you would have a very flexible off taker who can convert your generation into a dollars per megawatt hour equivalent that's at a premium to your nodal price. And in the event that you wanna sell that power back into the grid at your nodal price, you can just curtail this Bitcoin mining load.

So you have basically a put option and a call option, you're buying both sides of volatility behind the meter with your your intermittent renewable generator. It's it's a home run. And batteries are a similar things. You know, it's a similar application.

It's, even better because you get tax credits. But limited in that if you build a four megawatt hour battery, you can only consume four megawatt hours of stranded power, and a Bitcoin mining load can consume an endless amount of stranded power. There's a never ending bid from the Bitcoin protocol effectively to convert a lot of electricity into bitcoins. I mean, that's the other thing that's kinda crazy.

Most people don't realize the Bitcoin mining network, Bitcoin network is the single largest non state consumer of power in the entire world and it's growing. Now this this is a never ending deep and flexible bid for power everywhere. It's it's geographically agnostic.

It's like thinking about how we we're gonna steal man this argument. Right? Because while Bitcoin mining really supports the grid on the bid side, so on the on the lower prices side, it actually doesn't really help the grid apart from switching off and containing load, when when when margins are really tight, you know, these these hot summer periods, eighty gigawatts of you know, net load that those periods where prices go crazy and really we we have some big engineering problems to solve on the grid. The the problem is, I guess, if we're gonna steal money is that the the Bitcoin mining solution doesn't actually help on that side of the market. Whereas, batteries do. So you you you end up choosing between with this limited network infrastructure, IE grid connections.

You've got this one asset that they look kinda similar, but one asset class a class Bitcoin mining, which is the ultimate, as you say, the deepest bid on the market, which serves one type of purpose, but it doesn't actually shift power to serve solve the solution on the other end of the market, which is the end that gets all the attention because that's what pushes up consumer's bills. That's what is that, you know, that is technically where the highest emissions are on the network because you're running inefficient, or less efficient plant. And so I guess as a society, what we've gotta figure out is the ratio or the the amount of, each solution that we want in each area.

Yeah. And, no, you're you're absolutely correct that Bitcoin mining as a demand response, tool is it's not putting extra megawatts on the grid. It's just not contributing to peaks. And so the right way to think about Bitcoin mining is as a a tool to enhance the health of the marketplace.

Right now, if you went to go build a combined cycle plant or a nuke plant in one of these grids that had a massive penetration of intermittent renewables, you would not make money. I mean, these these plants are getting killed in these marketplaces because they're having to endure negative pricing and zero dollar pricing. And so rightfully, over the last five years, none of those generation types are getting built, and you're seeing massive amounts of renewables. So There really is a distortion in the market where a tax credit is basically saying, go build me power, and it doesn't matter if you ever make a dollar.

I'll I'll pay for your project via tax credit.

And so if you have this indiscriminate generation industry, that doesn't care really about making money and is chasing this distorted market signal, then the cure for that is a free market buyer of power who can absorb all that excess power, but also will not contribute to peak demand. That is what Bitcoin is. Bitcoin is not going to save you by putting an extra two thousand megawatt hours on the grid. During peak demand, but it is going to help restore the marketplace, which is reacting to these distorted incentive, these these price signal distorting market incentives.

Do you think we'll ever have tax credits for Bitcoin minus?

No.

But I do agree with you that is a national security priority, and I hope and this is extremely controversial opinion I have. But I hope that one day my business gets national by the great nation of Texas, and they recognize that it's a strategic asset to develop, and it should, you know, it should belong to the the people of Texas, And, yeah, I mean, most free market guys will never say come nationalize me. But in this case, like, this is really important.

And, you know, build one of Alamo.

San Antonio is tough. You know, it's it's tough to get interconnections in South Texas because there's there's a bunch of transmission problems.

But, yeah, that would be cool. I mean, our the naming scheme of our operating subsidiaries is Fort.

Our our first operating subsidiary is called FortBlocks.

Which is a funny double entendre.

Alright. So, last two questions.

Firstly, anything you'd like to plug, anything you're working on or any any big projects or announcements that you wanna get out to our listeners?

Yeah. I'd I would love to plug something. So my company We use Bitcoin to nominate a debt in our capital stack. So we we borrow Bitcoin from Bitcoin holders. We invest that into the means of production to create more Bitcoin. It's a perfect asset and liability match. There's there's nothing quite like it in commodity production finance.

We are planning to, build renewable generation. So we are planning to repower the renewables that exist in our Fort Stockton location. One of the biggest challenges that we run into there is bank guys, you know, finance guys who are doing renewable finance, that industry is extremely sensitive to credit risk and all the like. And, so getting financing for a Bitcoin mining co location with a bunch of renewables is gonna be tough. If you're one of those, open minded, creative thinker, creative thinkers who's got access to a bunch of of USD capital and you wanna be a part of an exciting Bitcoin project, and maybe get a piece of a Bitcoin yield for repowering renewables in West Texas, hit me up because we are we got an exciting project. It's gonna deliver better returns than other projects that just have regular grid interconnections. And, yeah, you told me a lot of bankers listen to show someone to speak to those bankers, come and find me.

Alright. Great. And we should probably say there's a whole lot of questions we didn't get to about some of your intellectual property, the software that you guys have built, more about the business model, some technical details about how Bitcoin operates different, you know, how can it access sensory services, regulation? There's a load of stuff we didn't cover here.

So if you're listening and thinking, oh, I wish I'd done that. We had it written down, but we, we didn't quite get there, but maybe time. Now to the last one, everybody's favorite question. What is your contrarian view?

Got it. Well, as a as a starting point, I'm pretty much all in on Bitcoin, and all in on on this business in West Texas. So, you know, I've invested an enormous amount of my own assets capital into this business. I've, I've lent all my Bitcoin into this business in our, Bitcoin denominated lending product.

And I'll take it a step further. Not only am I extremely convicted in Bitcoin but I'm extremely convicted in the intersection between energy markets and Bitcoin. And one day, I believe that there will be a very healthy liquid market for Bitcoin denominated finance, for electricity. You will be able to pay for electricity in Bitcoin and the the denominating unit for contracts financing agreements, off take agreements, and the like in electricity marketplaces will be Bitcoin.

It will be thriving and well developed ecosystem. Wow.

When?

While we're trying to get there, You know, we we are one of the firms who I would say is really pushing this forward. And the main issue here is large energy firms and electricity trading firms They're extremely sensitive to credit, cost of capital. And so if you add Bitcoin into your capital stack, I could see that harming those credit ratings and credit efficiencies Bitcoin confirms, on the other hand, we have nothing to lose. My firm is unbankable. The banking industry has been extremely discriminatory and predatory against us.

And so we have nothing to lose. We're already wearing all of this Bitcoin risk as a company and as an executive team. So I think it's gonna be bottom up. I think Bitcoin firms will make the transition, find open minded, that financing partners who can just look at a model and say this makes sense.

Rather than energy firms coming, bought a top down and saying, okay. We're gonna integrate Bitcoin into our capital stack. There's just too much of a penalty for them right now. That could change.

If that changes, it could it'll be open season.

I guess if you start from a period of universal exclusion from the banking community, then every step is only positive from there. And on on and on that note, Jamie, wanna say a massive thank you for coming on. I'm so we I'm sorry we didn't we only go about halfway through the questions. Much we didn't do.

Maybe we'll we'll have you on again. But one one last thing is that some of the things that Jamie talks about there, we're gonna put some links in the in the show notes. So go on Spotify and check out the links you can check out Jamie's company and some more details about the this, the Bitcoin mining at Fort Stockton. Thank you.

Yeah. Thank you. I I'd love to do it again. This was a great conversation, and, thank you for having me.