Last week I attended Digital Wildcatters’ 3rd annual Empower conference in Houston, an event focused on the convergence of bitcoin mining and the energy industry. Digital Wildcatters produced a great event full of high quality speakers, panels, and companies at a great venue. For anyone interested in attending in the future, I highly recommend. The Digital Wildcatters team is full of passion, skilled media operatives, and energy acumen. Kudos to them.
Below are some take aways from the conference:
Sourcing cheap generation at scale in North America is becoming much harder. Over the last 4-5 years, miners have been on a power binge soaking up as much cheap surplus as possible. In addition, the appetite for energy from AI focused data centers is already starting to price miners out. Miners will have to spend more time looking for relatively smaller opportunities in North America and/or expand overseas.
Steve Barbour of Upstream Data, a company that helped pioneer flare and stranded gas mining, had an interesting presentation about the opportunities for mining with “stranded” engines on the oil patch. The engines run 24/7 and usually have excess capacity that energy companies and miners can take advantage of. This is another example of mining squeezing as much value out of the energy supply chain as physically possible. The efficiency miners bring to the industry is unprecedented.
Fred Thiel of Marathon Digital, a large public miner, unveiled their immersion cooling system “2PIC”. Immersion cooling is used by miners to keep their mining fleet as performant as possible as long as possible. There are many immersion cooling systems on the market but this system has been designed to capture the heat generated by mining rigs and reusing the heat for applications at any scale. And Marathon isn’t first to market with this type of system. Heatcore, a venture seeded by WhatsMiner, a successful ASIC manufacturer, also has a cooling system that is designed to capture the waste heat from running mining rigs. The implications of this are massive. Up to 50% of electricity use in the United States is used for heating applications. Mining rigs and fleets could potentially be embedded in every possible retail, commercial, and industrial application. One can imagine millions of houses, buildings, farms, and factories having some type of mining operation on site powering its heating needs. This would lower electricity and heat costs for the end users with miners subsidizing those costs in order to capture more bitcoin revenue.
“Mullet mining: AI in the front, mining in the back”.
This business model and data center composition is becoming a reality. Miners are looking to differentiate by adding other revenue streams and each load brings their benefits to operators and the power producers. AI loads will be willing to pay more for power but are generally not flexible. Mining loads are extremely flexible but very price sensitive. The combination of the two is a high paying load that is partially flexible.
Miners have been very active in ERCOT’s demand response program (DRP) and received a lot of good publicity for it. But the next phase will include more miners participating in ERCOT’s frequency response programs (FRP) as well. DRPs are designed to reward loads that reduce their consumption during times of high demand whereas FRPs are designed to reward loads that help the grid maintain a stable frequency, typically 60 hertz (Hz). So in addition to shedding load during times when the grid is stressed, miners will also start to ramp up and down to help grids maintain a stable frequency avoiding large deviations in frequency that can damage equipment, reliability, and resilience.
Transactive energy is an idea coined by the US Department of Energy (DOE) in the early 2000s. The hope was to transform the grid by using open markets and automated systems to enable efficient, real-time, and flexible energy transactions among consumers, utilities, grid operators, and energy service providers. Synota, a start up based out of Columbus, Ohio is poised to make transactive energy a reality. Synota’s mission is to bring real-time settlement to the energy economy via Bitcoin’s Lightning network, reducing credit risk throughout the energy supply chain. The first users will be miners and their power suppliers. Bitcoin is a natural fit as a medium of exchange for the energy supply chain given how embedded its becoming in the grid itself. As it seeps into the supply chain its viability as a unit of account for energy related transactions will become even stronger. If Synota is successful, Satoshis-per-watt or something like it, is on its way to becoming a meaningful metric for the next generation of energy professionals.
Riot, a leading public miner, invested in a waste-to-energy startup, Reformed Energy. Reformed is using plasma gasification to turn waste product into electricity that Riot will use to power some of its mining fleet. Their pilot plant will be able to process 150 tons of waste a day. The hope is to use mining to prove and refine the prototype so it’s ready to be deployed for many different contexts creating a more sustainable, circular economic ecology. I expect to see more creative methods seeded by miners who become the first testers of new sources of energy.
Miners not only make energy economies more efficient and resilient but are also starting to commercialize new sources of power. The mainstream narratives and the perceptions they breed are the opposite of the truth.