Motion: Bitcoin mining is good for the grid (Lee Bratcher vs. Ben Hertz-Shargel)

Guests:

Lee Bratcher (twitter.com/lee_bratcher)
Ben Hertz-Shargel (twitter.com/benhertzshargel)

Host:

Richard Yan (twitter.com/gentso09)

Today’s motion is “Bitcoin mining is good for the grid.”

Bitcoin advocates think bitcoin is a good invention for many reasons, one of which is that it makes the power grid more robust. In 2021, Senator Ted Cruz of Texas made the claim that Bitcoin is, and I quote, “a way to strengthen our energy infrastructure.”

But is it? How exactly does bitcoin mining make the grid more robust?

In today’s debate, I wanted to focus more on whether bitcoin is good for the grid, not whether bitcoin is good. So I try to steer the conversation away from whether bitcoin is a societal good, independent of its impact on the electric grid.

One of our guests today is a researcher in the subject matter of electric power grids. The other guest runs a trade group that tries to advocate for bitcoin and crypto industries in the state of Texas.

If you’re into crypto and like to hear two sides of the story, be sure to also check out our previous episodes. We’ve featured some of the best known thinkers in the crypto space.

If you would like to debate or want to nominate someone, please DM me at @blockdebate on Twitter.

Please note that nothing in our podcast should be construed as financial advice.


Source of select items discussed in the debate (and supplemental material):

• https://www.cnbc.com/2021/12/04/bitcoin-miners-say-theyre-fixing-texas-electric-grid-ted-cruz-agrees.html
• https://www.utilitydive.com/news/bitcoin-mining-as-a-grid-resource-its-complicated/617896/
• https://www.dallasnews.com/business/energy/2021/11/29/why-cryptocurrency-miners-pose-the-next-big-threat-to-the-texas-electric-grid/
• https://www.woodmac.com/industry/power-and-renewables/grid-edge-service/

Guest bios:

Lee Bratcher is the President and Founder of the Texas Blockchain Council. The Texas Blockchain Council is an industry association that seeks to make Texas the jurisdiction of choice for Bitcoin, crypto and blockchain. The TBC helped to research two pieces of blockchain legislation that were passed by the state’s Legislative body signed into effect by state Governor.

Ben Hertz-Shargel is Global Head of Grid Edge at Wood Mackenzie, where he leads research across electrification, distributed energy resources, and demand flexibility. He is a Nonresident Senior Fellow at the Atlantic Council Global Energy Center and serves on the external Advisory Committee of the Alfred P. Sloan Foundation’s Energy and Environment Program. Ben holds a Ph.D. in Mathematics from UCLA and spent a decade developing demand response technology.

Chapters

• 0:00 INTRO
• 1:37 DEBATE
• 1:14:15 OUTRO

Transcript

INTRO 
 
 

[00:00:00] Richard: Welcome to another episode of the Blockchain Debate Podcast, where consensus is optional but proof of thought is required. I’m your host, Richard Yan.  
 
 

[00:00:15] Today’s motion is “Bitcoin is good for the grid.”  
 
 

[00:00:20] Bitcoin advocates think Bitcoin is a good invention for many reasons, one of which is that it makes the power grid more robust. In 2021, Senator Ted Cruz of Texas made the claim that Bitcoin is, and I quote, “a way to strengthen our energy infrastructure.” 
 
 

[00:00:39] But is it? How exactly does Bitcoin mining make the grid more robust? 
 
 

[00:00:44] In today's debate, I wanted to focus more on whether Bitcoin is good for the grid, not whether bitcoin is good. So I tried to steer the conversation away from whether Bitcoin is a societal good, independent of its impact on the electric grid. 
 
 

[00:01:01] One of our guests today is a researcher in the subject matter of electric power grids. The other guests runs a trade group that advocates for Bitcoin and crypto industries in the state of Texas. 
 
 

[00:01:14] If you're into crypto and like to hear two sides of the story, be sure to also check out our previous episodes. We feature some of the best known thinkers in the crypto space. If you would like to debate or want to nominate someone, please DM me @blockdebate on Twitter. Please note that nothing in our podcast should be construed as financial advice. 
 
 

[00:01:32] I hope you enjoy listening to this debate. Let's dive right in!  
 
 

DEBATE 
 
 

[00:01:37] Richard: Welcome to the debate! Consensus optional, proof of thought required. I’m your host, Richard Yan. Today’s motion: Bitcoin is good for the grid.  
 
 

[00:01:45] To my metaphorical left is Lee Bratcher, arguing for the motion. He agrees that Bitcoin is good for the grid.  
 
 

[00:01:51] To my metaphorical right is Ben Hertz-Shargel, arguing against the motion. He disagrees that Bitcoin is good for the grid.  
 
 

[00:01:59] Let's quickly go through the bios of our guests:  
 
 

[00:02:02] Lee Bratcher is the President and Founder of the Texas Blockchain Council. The Texas Blockchain Council is an industry association that seeks to make Texas the jurisdiction of choice for Bitcoin, crypto and blockchain. The TBC helped to research two pieces of blockchain legislation that were passed by the state legislative body signed into effect by the state governor.  
 
 

[00:02:23] Ben Hertz-Shargel is Global Head of Grid Edge at Wood Mackenzie, where he leads research across electrification, distributed energy resources, and demand flexibility. He is a Nonresident Senior Fellow at the Atlantic Council Global Energy Center and serves on the external Advisory Committee of the Alfred P. Sloan Foundation’s Energy and Environment Program. Ben holds a Ph.D. in Mathematics from UCLA and spent a decade developing demand response technology.  
 
 

[00:02:53] Welcome to the show, Lee and Ben.  
 
 

[00:02:55] Lee: Hey, thanks for having us. We're proud to be here.  
 
 

[00:02:57] Ben: Thank you. Good to be here.  
 
 

[00:02:59] Richard: Great. So we normally have three rounds: opening statements, host questions, and audience questions.  
 
 

[00:03:04] Currently, our twitter poll shows that most agree with the motion. That means they believe that Bitcoin is good for the grid. After the release of this recording, we'll also have a post debate poll. Between the two polls, the debater with a bigger change in percentage votes in their favor, wins the debate. 
 
 

[00:03:22] Okay, Lee, since you're in the "for" position. Go ahead and give your opening statement and tell us why you think Bitcoin is good for the grid.  
 
 

[00:03:30] Lee: Thanks, Richard. There's a couple things that we need to talk about before talking about the grid and that is, is Bitcoin itself good or bad? And it is a technology. It's amoral. So that's sort of irrelevant. But what I would argue is Bitcoin has the potential to be extremely good for people all around the world. 
 
 

[00:03:52] It is a monetary asset, a macro asset that is scarce. It creates digital scarcity and it is uncensorable by governments. It has a lot of properties of money, like fungibility, durability, and it's also a store of value. So, we see that Bitcoin is effecting positive change and create a human flourishing in communities that adopted around the world. And it's going to be another asset class similar to gold or real estate.  
 
 

[00:04:23] Now getting to the Bitcoin mining piece, whether or not Bitcoin is good for the grid, we do know that Bitcoin mining uses about 0.01% of global energy. That's less energy than we use for Christmas lights. Less energy than we use for the video gaming industry. 
 
 

[00:04:40] So we're talking about a values debate, and I know this isn't about values. This is about demand response and grid resilience. So... But from a values perspective, I would argue that Bitcoin has a stronger argument to be made than the energy that we expend on say video games or things like that. 
 
 

[00:04:59] When it comes to the grid we see, especially in the ERCOT grid, which I'm most familiar with, in Texas. ERCOT is an energy only marketplace that fluctuates on supply and demand. So that there's a spot market price for energy in Texas and there's buyers and sellers. And what Bitcoin mining does... There's two important reasons why it's good for the grid. 
 
 

[00:05:22] One, it is a controllable load. And so they participate in demand response and they are a controllable load resource for ERCOT, which means that they can turn off very quickly sometimes within just 5 seconds to meet market signals, and to meet demand for power of the grid.  
 
 

[00:05:39] Richard: I'm sorry, to be clear... ERCOT is the name for the grid system in Texas? Correct?  
 
 

[00:05:44] Lee: Correct. ERCOT is the grid system in Texas. The Electricity Reliability Council of Texas.  
 
 

[00:05:51] Richard: Okay.  
 
 

[00:05:51] Lee: So the most important thing is that they are controllable load resource. They increase base load generation by being present as a power buyer. But then when that power is needed by the grid like homes and hospitals, they can power down. And they do so at a pretty frequent clip. 
 
 

[00:06:07] Most Bitcoin mines in Texas powered down more than 20 times last year. And sometimes they power down just a little bit to do frequency balancing. Sometimes they power down all the way, if it's like a hot summer day, or you have a winter storm situation.  
 
 

[00:06:21] And the other reason that Bitcoin mining is good for the grid is that they're geography agnostic. So they can locate themselves in near nodes where there's grid congestion. So kind of away from the congestion areas and near nodes that have high generation and low demand.  
 
 

[00:06:37] So thinking about in west Texas, where you have a lot of wind power. There's times when that wind power is so abundant, there's not enough transmission capacity to get the power to the power consumers in Dallas, Houston, or Austin. So that power is actually priced negatively and the wind developers are eating a negative price. Sometimes up to $30/megawatt hour of negatively priced wind power in west Texas.  
 
 

[00:07:05] So Bitcoin miners are geography agnostic. They can go anywhere and they'll go and soak up that wasted power. And they provide incentives for increased generation, increased wind and solar by locating next to a wind farm or a solar facility, and being that power off-taker of first and last resort.  
 
 

[00:07:25] So for those reasons, I think that Bitcoin mining is good for the grid as specifically for a grid with a market system like ERCOT. It may be a different situation, in say a grid in California, like in PJM where it's a capacity market situation. That's probably a different conversation, but in a grid like ERCOT, when it's an energy marketplace, it creates really good incentives for more generation and especially for renewable generation.  
 
 

[00:07:55] Richard: Okay. So before we move on to have Ben do the opening statement, just wanted to clarify some things here. You mentioned that the case for Bitcoin being good for the grid is especially strong when it comes to ERCOT, which is the energy grid in Texas and not necessarily as such in the grid market in California. 
 
 

[00:08:13] And you mentioned something about the California system being capacity market versus, did you just say just energy market in Texas? Could you clarify the differentiation there? Why is it working in Texas and not necessarily so in California?  
 
 

[00:08:28] Lee: Correct. In some instances where there's a capacity market, power off-takers and certain entities within the marketplace will have to buy forward-looking capacity in order to ensure that those generators have an incentive to operate. So in those kinds of capacity markets where they're having to buy forward capacity before you use it, you have to basically buy power in advance. 
 
 

[00:08:53] Those kinds of locations are not as good for Bitcoin mining and Bitcoin mining is pretty much there's almost zero Bitcoin mining in California because of the way that their grid is structured. And that's perfectly fine. It helps the ERCOT grid. It helps create incentives for more generation. But in places like PJM in California, it's not as helpful. And Bitcoin miners don't locate there anyways. So it's kind of a moot point. 
 
 

[00:09:18] Richard: Okay. To maybe my last question on this point before we put it to Ben. So the fact that in California there are ways to purchase power in advance. You call it, capacity reserve. Maybe I'm getting the wrong term here. But why is that a hindrance to Bitcoin mining at all?  
 
 

[00:09:38] Lee: So, it generally reflects higher power prices. And I misspoke. PJM is actually in the Midwest. California is just the California ISO. Both places have a sort of a capacity market, but California's is particularly heavy on the capacity market side.  
 
 

[00:09:56] So if you're having to buy forward-looking capacity, there's really not as much demand response. Um, there's not as much value placed on like market signals, price signals of demand response. And Bitcoin miners take advantage of being able to be a controllable load and turn off when the grid gets stressed and they are financial incentivized to do that. And they can ramp back up, you know, at night or midday or times when the demand curve for power is a little bit flatter. 
 
 

[00:10:27] Richard: I see. So the fact that Bitcoin miners can take advantage of financial incentives that will exploit their ability to turn off their load ASAP. That kind of advantage does not exist in the way the California power markets are set up. So that's why the Bitcoin miners don't want to go there because there's no financial incentive that major. Is that correct?  
 
 

[00:10:50] Lee: That's correct. Yeah. And I guess a quicker way to say it would be like a deregulated market versus a highly regulated market.  
 
 

[00:10:57] Richard: Okay. Ben, why don't you go ahead and give us the opening statement. Sorry for the delay. Feel free to counter points Lee has raised, and also give your point of view as to why Bitcoin is not good for the grid.  
 
 

[00:11:10] Ben: Yeah. Thanks, Richard. I mean, just to clarify, I think there's a little bit of confusion about energy markets here. Capacity markets versus the energy only market of Texas is not really kind of material in terms of Bitcoin mining. NYISO for instance, the New York system operator, which is analogous to ERCOT, and CAISO in California in PJM, has a capacity market, a centralized one like PJM and yet there's a lot of Bitcoin mines trying to relocate to New York.  
 
 

[00:11:34] And California it doesn't actually have a capacity market as, a bilateral resource adequacy markets. So it's not quite the same thing. And it's not the case that there's no demand response or kind of short-term price signals in California. California has absolutely lots of those kinds of opportunities.  
 
 

[00:11:49] Mining location is really about energy prices and lacks regulation, and the ability to use kind of defunct fossil plants to leverage them to power Bitcoin mines. So those are the kinds of things that really drive where miners go, not the availability of demand response or a long-term capacity market. Cause in all markets, including in Texas, most energy is procured longterm.  
 
 

[00:12:12] But to my opening statement, I honestly find the claim that Bitcoin mining is good for the grid as an almost Orwellian assertion. Because mining is a almost unprecedented burden on the grid rather than a help. 
 
 

[00:12:25] I like to give the analogy that it's like starting to smoke two packs of cigarettes a day. But telling your significant other that you'll cut back on family holidays and on that basis, claim that smoking is good for your health. The reality is that Bitcoin mining represents a massive around the clock energy demand that is growing so quickly and raising emissions so quickly that governments around the world have intervened to step in. And that's European countries. That's Asian countries. It's all over the world... Um, perceives that level of a problem.  
 
 

[00:12:53] Lee mentioned that it's around the level of demand of Christmas lights. I'm not sure where that data comes from, but the Cambridge University Bitcoin electricity consumption index shows that globally mining consumes around twice as much electricity as needed to power every single light in the US. So a massive scale that's on the level of a country. 
 
 

[00:13:12] So there should be no question that we're talking about an absolutely massive energy demand globally. Although it does happen to be concentrated locally, which causes more significant challenges than if it was actually distributed. 
 
 

[00:13:24] Bitcoin mining raises energy prices and energy bills for consumers. It requires dedicated infrastructure investments in the grid that would not otherwise be necessary. And it raises emissions due to an almost exclusive dependence on fossil generation. I want to be clear that I'm only talking here about proof of work mining, rather than any other consensus method. 
 
 

[00:13:44] A few key data points that illustrate these points are, uh, around 5 gigawatts of energy demand is expected in Texas in the next couple of years. Texas has a peak demand of around 75 gigawatts. So we're talking about raising the total energy demand in Texas in ERCOT by 7%, which is absolutely massive and would double load growth in the state. A Berkeley study has found that mining has cost residents and businesses in upstate New York $250 million per year in higher electricity bills. 
 
 

[00:14:16] And finally, if you look at the new mines that are trying to come online in New York, which are powered by moth balled coal generating capacity, which are coal fired plants that were deemed uneconomic long ago during the Shale Revolution and switch to natural gas. These plants that are trying to come online would collectively admit 8% of New York's 2030 emissions targets. So these plants and mining in general is in direct opposition to net zero goals.  
 
 

[00:14:43] Now, there are three claims that are usually made to justify or to claim that mining is good for the grid, which are easily disproved. The first one is that mining helps the grid balance supply and demand because solar and wind are known to be intermittent. And therefore you need a sort of flexible demand to soak up excess generation, is the story.  
 
 

[00:15:04] The reality is that it's not needed, uh, no loads are needed to do this. Renewable plants including all utility scale, solar and wind have surgical control over their output. And they can curtail whenever they're called upon by the grid operator for any sort of grid reliability need. 
 
 

[00:15:20] And this is proven every day in all locations all over the world. It is true that there are negative pricing events that are very rare on the level of 1% or 2% of the time, you see prices go negative. This does not relate to reliability of the grid. This is just about paying generators who prefer not to shut off. And I'm sure we'll go into this topic more later.  
 
 

[00:15:39] Lee mentioned co-locating Bitcoin mines near solar and wind farms in order to be the first and last resort for energy consumption. But we have to just kind of state the obvious that we don't want to siphon off clean electricity onsite by a Bitcoin mine. We want that clean energy to go to our economies and our homes. So it's not helpful to have something they are siphoning that demand.  
 
 

[00:16:02] Second claim is that mines can shut off during times of stress. Like we saw in limited cases during a hurricane, sorry, a winter storm Ori last year in Texas. And therefore that they are helping the grid. But this just takes us right back to our cigarette analogy before. Which is that just because Bitcoin mining reduces the massive burden that it otherwise poses. And it reduces it on occasion, it doesn't make mining a help to the grid. It just means that it's not actively causing a blackout. In order to really see this as a help, you need to kind of beg the question and assume consuming 7% of Texas' energy is normal. And then when you reduce that massive consumption, you're kind of providing a help. But no thanks. The key point is that 99% of the time mining is raising prices. It's increasing emissions. And is it a transmission and distribution burden on the grid.  
 
 

[00:16:50] And the final kind of claim that's often made is that mines can simply go green by using renewable energy and maybe even helping those renewable generators in the process. But it first needs to be pointed out that nearly all mines today are powered by fossil fuels, to such an extent, as I mentioned before, that it could compromise New York state's emission targets for 2030 on its own. And for that reason, the state assembly of New York has passed a two year moratorium on carbon based mining. 
 
 

[00:17:17] And just like the country of Sweden, in fact, it called on the EU to eliminate proof of work mining for the same reason.  
 
 

[00:17:25] But the critical point is that even if mines did switch to renewable energy, it would still be directly fighting our country's net zero goals. And the key point to understand which is not widely appreciated is that renewable capacity like solar and wind farms and the transmission and distribution infrastructure that are needed to deliver it to load centers are scarce commodities. 
 
 

[00:17:46] You can't simply create these plants, and you can't simply get their power where it needs to go. And I will go through all those points in great detail later on in the conversation. Mining would be taking away these resources from decarbonizing sectors like transportation and building heat and manufacturing that are critical to achieving that zero goals. 
 
 

[00:18:06] So the basic reality is that Bitcoin mining is not only a burden to the grid, but it's an unprecedented burden in terms of the rate that it's growing, the emission intensity of the energy it's relying on. And the fact that all of this is in pursuit of currency speculation rather than a core societal need. Thanks. 
 
 

[00:18:23] Richard: Okay. All right. I could hear the, um, the mic drop there. Okay. Let's move on to phase two of the debate here.  
 
 

[00:18:32] Lee: Can I have a chance to maybe comment on some of the numbers that...  
 
 

[00:18:36] Richard: Okay. Sure. Sure. Sure. Go ahead. Lee  
 
 

[00:18:38] Lee: Um, I would agree with you that Bitcoin mines that are powered a hundred percent by fossil fuels are not necessarily the right way to go. In Texas, the Bitcoin mining industry is using greater than 50% renewables. And that's higher than the average power consumer in Texas, which is around 33% renewables. Also. Global energy usage of Bitcoin mining again is 0.01%. And that aligns with the Cambridge Alternative Finance Study at 16 gigawatts globally, uh, is 0.01% of total energy consumption. 
 
 

[00:19:18] And then when you said negative pricing is 1% of the time, I'm not sure where the 1% maybe it's like 1% of the time nationally, but in west Texas it's 15% of the time. So, that's another number that I think probably just a clarification of terms. It's probably true that 1% of negative pricing nationally, but in west Texas, it's a considerably higher percentage. 
 
 

[00:19:42] Also when we're talking about the renewables question, you're right in that there's a finite number of resources to construct renewable assets, wind, and solar particularly, and the hydro as well. The thing that I think we miss in this conversation is that they need a financial incentive to do that. 
 
 

[00:20:02] And in most locations throughout the United States, but this is particularly true in ERCOT in Texas, though they have overbuilt renewables because the geographic locations where renewables are being built like the wind corridor in Texas or places it's particularly sunny, are not places that need a lot of power. 
 
 

[00:20:21] So we're maxed out. The reason why we have negative pricing is because we've overbuilt our renewables. And if we want to have more renewables on the grid, the renewable developers need an economic incentive to do that. So a Bitcoin mine actually provides that economic incentive and they build it. 
 
 

[00:20:38] And if they use that power. And if the solar field or the wind farm is over-producing, then they can push that power back into the grid. And of course they could push it back into the grid. So that this really gets to an important point which is, does Bitcoin mining make prices go up? And in New York, that study that you quoted, I don't doubt that that is true that Bitcoin mining added demand on power which made prices for residents go up. But that is in a situation in which Bitcoin mines didn't also bring with it added generation capacity.  
 
 

[00:21:12] In the ERCOT grid it's such that anytime you have increased demand for electrons for electricity, for power. There's a 1 megawatt increase in demand, that gives generators a financial incentive to create more generation capacity. So, we actually see that Bitcoin mining has the potential to reduce power prices in Texas because it reduces peak demand moments. So power prices are set in Texas by 4CP. And when you have increased base load generation but then a significant, as you said, 7% of the grid can turn off, you actually don't increase peak demand, you just increase generation. And peak demand could actually stay at about 75 gigawatts in Texas, which is where it is now. Because the miners do turn off during those peak moments for... it may only be for hour at a time, but you know, Friday afternoon at 5 o'clock when everyone's going home and turn on the gray sees and power is peaking. That's when demand peaks are set, usually in August or July in Texas. So anyways, just a couple of thoughts that came to mind. 
 
 

[00:22:24] Ben: Yeah. And I mean, um, let me kind of go back on to you on those. So absolutely it certainly is true that in west Texas, given the kind of fact of that's where they cite all the generation, because it's just a great natural resource location. And it's far from load centers that you see negative pricing there much more often. So I believe the 16% number.  
 
 

[00:22:43] But the critical point is we should not be investing... As you put it, there's an overbuild in west Texas right now. The problem is not we need more generation in west Texas. The problem is we don't have enough transmission to get that clean energy to load centers in Dallas and Houston and elsewhere. 
 
 

[00:23:01] So what we need are transmission investments, not generation investments, or certainly kind of paying generators artificially to exist while failing to deliver more clean energy to the rest of the state. So in terms of price signals, what we need is transmission. And that is a very slow moving process. 
 
 

[00:23:21] It's one of the biggest challenges, honestly in clean energy today. We're gonna need 60% greater transmission across the country in 2030 to meet net zero goals. It's going to require between a $200 and $700 billion investment. So we need transmission investments, not kind of essentially feeding sugar to the generators to keep them humming while we fail to deliver the energy. 
 
 

[00:23:41] The other point I wanna make is, in terms of the scarcity and in talking about like renewable energy isn't just easy to make. Generators themselves, even for a mine to co-locate and say, you know what, I'm going to build a solar plant right next to me. And therefore I'm doing no harm... There are massive challenges today in supply chains for solar in the interconnection processes in every utility across the country, and on all the independent system operators like CAISO. There are huge queues of generators looking to interconnect that can't because it takes too long to do the study, or there's simply no transmission available. 
 
 

[00:24:16] There are existing solar tariffs. There's a new investigation and I'm sure you guys are familiar with looking at tariff circumvention within APEC countries, which are significantly causing chaos within the solar industry. And you have tax equity limitations, which we could get into getting into financial minutia. 
 
 

[00:24:33] But bottom line is getting any sort of renewable generator built is a tough thing to do, and we need to build them and have them serve societaly critical loads, like our buildings and our factories and our homes, and our hospitals. Not kind of building minting money through Bitcoin.  
 
 

[00:24:51] One other technical point that you mentioned is how mines can turn down during coincidence peaks. So as you said, this is the time of the year when demand on the grid reaches its greatest, uh, you mentioned 4CP, this is for people's understanding. Businesses are often measured by what was their highest usage at the time when the grid was experiencing the greatest congestion and that determines a fraction of their energy bill. 
 
 

[00:25:17] So you're right that in a ideal scenario, which is not the reality that minds would completely shut off at all peak moments of the year. But that's even imagined that they did. And so those 5 gigawatts would not increase our 75 gigawatt peak demand. The rest of the time. What you're doing is you have a fleet of generators who are generating for the 75 gigawatt, or let's say 60 gigawatt demand on the grid in Texas. 
 
 

[00:25:42] You now have Bitcoin mines that exist in, let's say 5 gigawatts cause they're humming, because it's not a grid stress event. What ERCOT needs to do, ERCOT is responsible for dispatching generators to match whatever demand is. And ERCOT like all grid operators orders generators according to what's called their supply curve. 
 
 

[00:26:01] So basically ordering them by how cheap they are, and usually how cheap you are corresponds to how clean you are. Or at least it's the case that the more expensive generators are usually the dirtier ones. So what it means is that all these other times ERCOT needs to dispatch 5 gigawatts of additional dirty capacity and costly capacity to satisfy load at the other 99% of the time outside of that 1% of, or more than 1% of peak demand times. And so that is what's raising prices. Because in Texas, in ERCOT, like in all organized electricity markets, generators are paid what the most expensive generator charges. And by going up 5 gigawatts, you're going to go up significantly along the cost curve to pay for that really much more expensive unit, everybody gets paid that amount.  
 
 

[00:26:46] And so those costs get passed to all customers. And those prices are the realtime prices Lee, you mentioned in Texas energy market, but they also inform long-term prices through forward curves. Because as prices go up from the say $30/megawatt hour to $35 or $40/megawatt hour, because of that increased load those prices just get priced into everyone's electricity rates that you pay, or your retail energy provider, or the longterm contracts that are paid out to that utilities pay or the retailers pay the generators. In addition again, to the fact that these are higher emissions units. So your basically paying more and you're emitting more.  
 
 

[00:27:23] Richard: By the way you mentioned the dirtier the generator the more expensive it is. Is this because the demand is higher because of the electricity generation with third-year sources is cheaper and therefore there's higher demand for these third-year generators?  
 
 

[00:27:38] Ben: No the way it works is if you imagine the supply stack of a typical market, you have your wind turbines and your nuclear generators and your gas and your coal and solar, et cetera. And hydro. Typically the renewable generators are the ones at the bottom of the supply stack. Cause they're bidding at either negative prices or zero prices cause they just don't have operating costs.  
 
 

[00:27:58] And you also have nuclear there which is base load which base they can't turn off usually. So you have nuclear and which is also clean. So you have nuclear and renewables. And as you go up the stack, you start getting into the gas fired plants, the kind of lower cost, like the combined cycle gas plants, and you get into then some of the single cycle gas plants and coal plants. 
 
 

[00:28:17] And so as you're getting more and more expensive, you're also getting dirtier. When the stuff really hits the fan on hot days, you have these, um, peaker plants, which are very dirty and very expensive and are the kind of last resort resources. And so that's what gets dispatched, these dirtier resources that are the more expensive to run and our art would be more and more dispatch because there's additional demand on the grid because of Bitcoin mining. 
 
 

[00:28:42] Lee: I would say that the thing that you're still not including in the calculus is the increased generation. Whenever a miner is locating somewhere they're also sending a signal, an economic signal for increased generation. And that's oftentimes on the cleaner side, right. 
 
 

[00:28:57] It's not going to be coal anymore. Right. Coal is making up an ever diminishing portion of power. In Texas it's around 11% and falling. So the model that you're describing is assuming no increased generation, but increased demand. And if that were the case, then yes, you know, power would go up in price. But the miners are incentivized to seek out stranded and wasted energy in far-flung parts of the grid. Like they're not locating in downtown Austin where TDSP charges are really high because it's a grid congested area. It's hard to get power to those places. I think that's the side of the equation that we need to certainly consider. 
 
 

[00:29:39] Ben: I mean you are right, that I'm not taking into account that like a miner is going to go seek out or bring with it some source of generation for free, like independent of the rest of the world. Because the point I'm trying to make is, generation is a scarce commodity, and transmission and distribution is even scarcer. 
 
 

[00:29:55] So wherever mine locates, even if it's co-located with a far-flung wind power plant way out in west Texas or somewhere else in Oklahoma. And it says, "Hey." Like there's no such thing as this kind of far flung plant that's just being wasted. If it's being wasted, it's because we don't have the transmission capacity to get the power where it needs to go. 
 
 

[00:30:13] One of the biggest challenges today in clean energy is building out transmission that can get clean generation from these far-flung places to population centers, because you are right. They're not going to be located in the center of Austin. They're gonna be out in west Texas. So what we need to do is figure out how can we get that clean energy to the people and to the businesses and homes where it needs to go. 
 
 

[00:30:36] And so if a miner is co-locating and sidling up to a plant in Oklahoma that doesn't have distribution or doesn't have transmission to get it to Chicago or to Dallas, we're wasting that power because we're just using it to mint Bitcoin. We're not getting it to the schools and homes that can use it in these big cities. 
 
 

[00:30:54] We need to be investing in transmission. That is the problem to solve. Not simply creating new generation that sits there in an island in the middle of nowhere. And even if the mine built its own solar plant and says, I don't even need the grid. I don't need anything else. I'm not taking away from anything. I'm building my own. Than it is using to build a utility scale solar plant requires... I listed it before. It's a supply chain of solar modules and the balance of system and all the other components of a solar plant that are hard to get now and in post COVID kind of rebuilding world where the supply chains are still disrupted. 
 
 

[00:31:29] There are tax equity limitations this year. Going in the back of an interconnection queue, where you're taking the spot of something that's in the interconnection queue. And there are thousands of projects waiting to go. And the Bitcoin mine gets the next one instead of the project that was going to power the business or the school. So every unit that it takes, even if it's on its own in the middle of nowhere is still stealing several types of valuable resources from the rest of the economy.  
 
 

[00:31:54] Lee: Then I would say that when we're talking about, and I agree that transmission capacity is a public good that we need a lot more of. 100% agree with that. But you can't just get a utility to build more transmission capacity to nothing. So if you have a Bitcoin mine that incentivizes more generation, even if it's out in the middle of nowhere, it creates a, if you build it they will come type scenario where you can more easily convince a utility to build transmission out to that facility. And so, there's no way they'll build transmission to a place where there's no generation. So the Bitcoin mine creating a generation instead of also creates a transmission construction incentive.  
 
 

[00:32:39] And I would also say that there is no school or residents that is not getting power because a Bitcoin miner is in the interconnection queue. That is absolutely a kind of a straw man. There are Bitcoin miners that are in the interconnection queue to be connected to low population density areas where there's plenty of power. Any school or business or residence that's not getting served is absolutely going to be top priority for the grid operator for the TDSP. I think that's a complete straw man argument  
 
 

[00:33:17] Ben: So, um, definitely what I'm saying is not as strong of an argument and I'm not claiming that a Bitcoin mine is preventing a school from turning the lights on. It would definitely be preventing it from getting a cleaner generation mix. If there is a... Let's imagine a solar plant in west Texas that could otherwise connect to, um, either if the same investment were made in a Bitcoin mine has made to invest in generation or when starting transmission that buy the Bitcoin mine absorbing all of that energy rather than that energy feeding the population center, including the school and everything else. That population center has a dirtier mix than it would have had had that clean resource been providing it.  
 
 

[00:33:54] Lee: You're comparing generation investment with transmission investment, which are two different things. The private sector doesn't invest in generation utility and the state invest in generation. So they're not analogous you can't just say, well, investment dollars that we're going to go towards generation or load can now be transferred to transmission because it's a different kind of investment and different types of entities make.  
 
 

[00:34:18] Ben: So transmission is absolutely made by lots of there are merchant transmission projects. And at the end of the day, all of this money is coming from low consumers, because we're paying for energy one way or the other. We pay for the generation, the electricity that's produced by a generator, and we also pay for the infrastructure built on our behalf.  
 
 

[00:34:36] And so I agree with you. It's not a one for one, a dollar. You can't like liquidly move a dollar from generation to transmission. But what you are proposing is to prop up in a sense generation or kind of insert Bitcoin mining as a needed draw for generation. 
 
 

[00:34:52] There is no need to insent generation that is coming online today, rapid pace, that is limited only by these constraints that I'm mentioning about supply chains and tariffs and interconnection queues and transmission. Not by lack of need. So there is no need or uh, draw a Bitcoin mines to produce generation that is happening organically. What's needed is transmission. 
 
 

[00:35:14] And I would rather have society be focused on solving the problem of transmission than to have a Bitcoin mine come in and send the price signal that these generators are not making money because there's not enough transmission to get them to their load and force governments and utilities and groups to recognize that we have a problem. That we need to get clean energy to where it needs to go, cause it's unable to do it, and it's not profitable enough. Rather than kind of feeding it, having just automatic off-take by Bitcoin mines so that generators get paid, but no one benefits from the energy. 
 
 

[00:35:47] And in terms of the whole like school not getting clean energy kind of that side of the argument. I mean, at the end of the day, there are two sides. There's the demand side and the supply side in energy. And if Bitcoin mines are taking clean energy they're adding to the demand side. So your demand side grows. 
 
 

[00:36:05] They can contract with a renewable provider and so claim that, "Look. We're getting clean energy. We're doing no harm. We're the good guys." But all that means is that same renewable energy that would have gone to any other consumer in the economy is now going to the Bitcoin mine. And so those consumers are... You can allocate the dirtier more expensive generation that needs to be spun up by the grid operator because demand has risen.  
 
 

[00:36:28] So you're just kind of shifting around kind of attribution of who's receiving what power. But at the end of the day, by increasing the demand, you're increasing the amount of generation that's needed on the system. And by definition, by the way that markets work, that generation is the more expensive and the dirtier kind, which raises costs and raises emissions.  
 
 

[00:36:47] Richard: So I sort of want to come back to the much touted benefit of Bitcoin mining, combating negative power price. So can either of you explain why having the power grid have negative price for a long time is a bad thing to begin with? Why does that problem need to be cured?  
 
 

[00:37:09] Lee: I don't necessarily think that it needs to be cured. It's just because of federal subsidies, solar and wind generators can take negative prices for longer because they have, I think it's a $30/megawatt hour subsidy. So they can go up to negative $30/megawatt hour and still be breaking even. 
 
 

[00:37:28] It's just a function of where the wind is and where the solar is, and it's not located where the power off takers are. The population centers where the power is needed. And Ben and I agree that increased transmission is needed.  
 
 

[00:37:41] I don't think it's a zero sum game though here, Ben. This is maybe somewhere where we could also agree. This is a positive sum game, if you will. In that, for every dollar that's spent on generation does it mean a dollar is spent on transmission? We want more money spent on energy in general. Energy is what brings societies from one level of human flourishing to the next. And we want societies to flourish and the quality of life to go up. And as we see increased generation throughout the centuries or increased energy. It's not always electricity, going back centuries, you see increased human flourishing, longer life expectancies, higher GDP. So we want more investment in energy, all around. Renewables, clean, natural gas, certainly coal is not something that I think... Nobody really wants more investment in coal. But more energy equals more human flourishing. 
 
 

[00:38:39] And I think that's what we're going after here is a place where people have an abundance of energy. And my argument is that Bitcoin mining creates incentive for more generation. It also does create demand and Ben is correct in that, but it is a flexible demand and we need flexible power off-takers because the supply or the demand curves of power is so disjointed. 
 
 

[00:39:04] It's so centric on those morning and afternoon times where there's a lot of wasted energy because of the way the demand curves look and the shapes of those curves. And so flattening out that curve is a good thing. And I think it's important also, you know, if Bitcoin itself has zero value to society, then Ben is right. Bitcoin mining is useless.  
 
 

[00:39:26] So I think we first needed to say, does Bitcoin have more value than like say video games to human flourishing? And I would argue absolutely, yes it does. And video game usage is you know, dwarfs the amount of energy that's used on Bitcoin mining.  
 
 

[00:39:41] Ben: I mean, in terms of the whole, you know, the more energy, the better human flourishing... Totally agree that like the more that we can produce clean energy, the better we are off as society. But just to paint a bigger picture for the audience, we are in a situation for climate change in which we need to get off certain kinds of fossil fuels or broadly all fossil fuels to reach net zero targets. 
 
 

[00:40:05] That means electrifying a lot of industries. What that means is converting certain kinds of factories and the production of heat within buildings, within both residences and businesses and all buildings, in terms of water and space heating, as well as to converting those to electricity. Converting our vehicles to electricity through electric vehicles, and other sort of more esoteric things like industrial processes, that normally are built on combusting fossil fuel. We need to convert those to electricity.  
 
 

[00:40:33] So the bottom line is the demand side of the US economy and all economies, are going to need to grow dramatically. Because that is a tremendous amount of electricity demand that must happen if we are to wean ourselves from fossil fuels. 
 
 

[00:40:45] Now on the supply side, it needs to reach that. It needs to meet all of that significantly increased demand over the coming 30 years. That is going to be a huge challenge given the very slow scale that we can realistically build out clean energy and deliver it. As Lee and I both agree that generation is coming, but it's limited in how it gets to load centers. 
 
 

[00:41:06] And so it is a huge challenge both to build all of these plants for the kind of the reasons that I've given about these kinds of scarcities of supply chains, interconnection queues, reviews, and transmission capacity, which is the most fundamental one. It will be an enormous, enormous challenge. I've seen kind of presentations from academics on how almost the challenge of trying to scale renewables to the level that we need to, to reach electrification in the times that we need it to.  
 
 

[00:41:32] To do that, the last thing we need is a major form of energy demand that has no contribution to electrification. Where there is no contribution to net zero. So we can now talk about the value that Bitcoin provides and relative to other cryptocurrencies that don't require this absolutely enormous energy consumption, but a very basic thing that people need to understand is the demand side is going to grow enormously. And for the supply side to grow enormously, the last thing we need is this other third actor who comes in as a massive energy hog.  
 
 

[00:42:05] So I will pause there in case we want to kind of reorient towards... We can also talk about negative pricing. I'm happy to explain that if you'd still like to Richard or if we want to talk more about um Bitcoin as a crypto currency.  
 
 

[00:42:15] Richard: Yeah. Maybe very quickly just on negative pricing, because this is much touted as the benefit of Bitcoin mining to come in when the supply power on the grid outpaces the demand. I need to understand why is that a problem to begin with? If the grid has more power than what's being consumed? Why is that an issue?  
 
 

[00:42:35] Ben: So I think Lee kind of spoke to this before, but I will basically add to it that you are right. It is not a problem. As I mentioned before, generators can simply turn off or they can reduce their output. So having too much supply is not a reliability problem kind of period.  
 
 

[00:42:50] Richard: Yeah, because I thought the whole argument, well, one of the main arguments for Bitcoin mining being useful is that it can be used to offset this period of negative pricing. And if that's not a problem that doesn't seem like a tangible benefit then.  
 
 

[00:43:01] Ben: So, let me say something and then Lee, I'm sure will have a rebuttal. The negative pricing is about generators not wanting to turn off. Preferring not to turn off. Because as he mentioned, wind plants have a production tax credit of $30/megawatt hour, which incentivizes them to keep running even when prices are negative. And prices are negative means, yeah, that you just have this imbalance where there's more supply than demand locally right where you are. Not across the grid, but right where you are in West Texas, where there's so much generation and there's so little demand. So those generators prefer not to turn off they'd rather get paid.  
 
 

[00:43:36] But if there was no Bitcoin mine co-located there, they would simply turn off. Or they would reduce by exactly how much they need to make sure demand and supply are perfectly in balance. So there is zero reliability value being provided by Bitcoin mines. They're simply paying the local power plants, the gas plants who don't want to turn off because it's costly for them to switch off. Or to pay the wind farm who doesn't want to reduce because they're getting paid. They're going to generate anyway. Cause they're getting paid even for negative prices. So it's just about kind of paying generators when they prefer not to turn off. That is the value. There's no reliability.  
 
 

[00:44:09] Richard: Okay. Lee, do you have something to add there? 
 
 

[00:44:12] Lee: Um, as far as negative pricing, not really. I think the interesting conversation for the audience is probably the value of Bitcoin because this is all a moot point if Bitcoin is not valuable to society, then we shouldn't use any energy on it, even if it is good for the grid. So if it is valuable, then let's have a conversation about relative value relative to other things that we spend energy on like uh Netflix streaming videos and stuff.  
 
 

[00:44:41] Richard: Yeah. I mean. So the topic at hand is still whether Bitcoin is good for the grid. This is kind of independent of whether Bitcoin's a good thing or not. Imagine we're discussing some kind of widget which doesn't do anything at all. And now the question is the introduction of the widget into existence, does that help the grid or does it not help the grid? Now, whether that widget is actually good for humanity or not, it's actually a orthogonal thing. So I think we should probably focus more on whether this widget is indeed doing good for the grid or not. And then whether that sacrifice, if it's not for the grid, if the conclusion is that that widget is bad for the grid now, is that sacrifice worth making? That's the second question that needs to be asked. Which is sort of outside the scope of discussion today. Does that make sense?  
 
 

[00:45:29] Lee: Sure. Sure.  
 
 

[00:45:29] Richard: Yeah. Because if this widget is good for the grid to begin with, then we don't need to debate the merit of the widget. It's only when it's bad for the grid, then we need to decide, well, should we still do it? Or, you know, maybe it brings tangible benefits where if you do the pros and cons, the pros exceed the cons.  
 
 

[00:45:47] Lee: Yeah. I think if we're just talking about, is it good for the grid or not? That makes sense. I'm talking a little bit about Bitcoin's value to society. Ben's talking a little bit about carbon net zero goals. So both of us are bringing in some outside stuff. So if we narrow it even just to, is it good for the grid or not. 
 
 

[00:46:05] Again, I think that kind of depends on the pins on the grid. What ISO are we in? And if we're in ERCOT, it's absolutely good for the grid. The CEO of ERCOT Brad Jones, who we met with yesterday would absolutely agree. And he had in public comments has said that Bitcoin mining is good for the grid. It creates grid resilience because of the controllable load nature of it. And it also is incentivizing more solar and wind in particular.  
 
 

[00:46:34] Richard: Okay. And just to harp on the controllable nature of it a little bit. Right? That you said Brad Jones is an advocate for. So essentially what that means is you can turn it off very quickly. Is that what you mean by controllable nature?  
 
 

[00:46:47] Lee: Correct. It's a tool it's like a peaker plant, you know, it's a demand side peaker plant rather than a supply side peaker plant. Which peaker plants take a long time to ramp up their dirty, you know, it's peaker plants are not clean fuel. But Bitcoin miners can ramp down really quickly and it acts in the same way helping to balance the supply and demand.  
 
 

[00:47:10] Ben: So there is a fallacy here that I want the audience to really understand. Which is in order to agree with that argument, you have to stipulate that you start from zero where Bitcoin mining doesn't exist. You then assume and say, it's okay that it consumes a massive amount of energy all the time. And then you say, well, relative to consuming that massive amount all the time, I'm willing to reduce every once in a while when there's a really critical thing like the grid is really stressed or there's a winter storm or heat wave or something like that. For that period of time, I'm going to turn off and saying, I'm doing good. So absolutely relative to consuming massively 24/7, that is doing good. But in order to objectively evaluate Bitcoin mining in general and make some claim that it's good for the grid you need to have started from the premise that that massive consumption 24/7 was normal. 
 
 

[00:48:00] And I don't concede that at all. It is not normal. It's starting from a massive, massive burden. And simply slightly mitigating its effect some of the time. At the worst possible times is fine. At this terrible moment, I'm going to cut you a break and I'm going to turn off for awhile. But the rest of the time I'm sitting there on your back increasing the price and the emissions of the grid and also overburdening the grid itself.  
 
 

[00:48:26] You guys are right there. We're talking a little bit less about the physical nature of the grid. When electricity passes through wires, through transmission distribution wires, it causes wear and tear. It can cause them to overheat. There are transformers that can over time get overheated when there's a lot of load at one time. 
 
 

[00:48:41] So there's absolutely a cost to the grid of having this level of, you know, 5 gigawatts of demand is massive and investing in new infrastructure that can support that. Which a lot of the utilities in Texas are now confronting. Because they have these requests from miners who want to build in their territory. And I've seen a number of examples where they say this is going to cost. Uh, there was one let's see. So the Rayburn county electric cooperative in Texas is considering a couple of mines. Each one would cost $20 million in grid upgrades, which would go to customers. Each of these would consume as much as 60,000 homes. 
 
 

[00:49:17] Austin energy is considering 5 different mines that might require a new transmission line. A dedicated transmission line. So there is absolutely a burden on the grid of this, not only about the energy usage and the fact that we're talking about more generation, a higher cost of that generation and emissions.  
 
 

[00:49:37] Lee: Yeah. What we're assuming still though, that when you say Bitcoin mining starting from zero adds a lot of stress on the grid, Bitcoin mining is bringing with it increased incentives for generations. So, as Bitcoin mines get built out, so does generation. And oftentimes it's renewable generation. 
 
 

[00:49:57] So saying that it's just a massive strain on the grid it's not accurate. These mines are not located in places where transmission mines are overburdened. They're specifically seeking out stranded energy and locating near transmission capacity that was built out because they thought that there was going to be big off-takers and big load there, but there ended up not being. In these particular situations where you're referencing you munies and cities that are having to build dedicated lines, that's investment in transmission capacity where we both agree is important.  
 
 

[00:50:36] So I don't see the problem with investing in transmission capacity. If Bitcoin is going away or if it's going to die, which I don't believe it is. But if some people believe it's going to die when it does, or if it does, then it leaves behind increased generation because it created incentive for it. And increased transmission because it created an incentive for that investment to be made. 
 
 

[00:50:58] There's also a lot of tax revenue going into those jurisdictions that otherwise would not have been there to help pay for those kinds of upgrades. If you talk to the people in these rural counties like Milo county and Dickens county and the county you referenced earlier. But I've been out to these counties. I've talked to them. The county judge or the municipal district economic development guys. They love the Bitcoin mines because it brings tax revenue, creates jobs. It's really good for these rural communities.  
 
 

[00:51:31] Ben: The first is that when we talk about, or I bring up kind of building distribution transmission, this is not in the kind of positive sense that we were talking about before of getting electricity where it needs to go to the homes and businesses. This is dedicated infrastructure needed only to support Bitcoin's needs. 
 
 

[00:51:49] So this is not the right investment that these utilities would make to satisfy society's demands for clean energy. These are dedicated investments that are not the right ones that they would otherwise make. So these would be the legacy that Bitcoin would leave. If it ends up being, you know, being passed over for a proof of stake or some other sort of cryptocurrency years into the future, kind of the wrong investments. 
 
 

[00:52:11] The other thing I want to just point out is it is not all the case. And you've made this point a couple of times, that like Bitcoin is bringing with it generation capacity. I just want to be clear that like generation capacity has been growing massively in this country everywhere. Certainly including Texas independently of Bitcoin for years and it is limited only by the factors I've mentioned before. It is not growing or in the existence of Bitcoin does not meaningfully drive any sort of material growth in generation. So it's not the case that you can say, well, you're increasing your demand, but you're also bringing with the generation so they kind of offset. It's not at all the case. 
 
 

[00:52:50] Generation is trying to come online all over the country. But because of those factors, I've mentioned that I won't repeat them again, it's limited. And so again, we get to this fact that clean resources, both the generation and the transmission are scarce resources that take years and years to develop and to deal with and to get built. And so we want to use them for the right societaly valuable purposes, not for Bitcoin mining.  
 
 

[00:53:13] Lee: I mean, you're continuing to talk about society valuable things. I would love to have a conversation about if Bitcoin is valuable to society, but it sounds like that's not where we're taking the conversation. And also it's simple economics. If you have more demand for energy, that's a market signal for more generation. 
 
 

[00:53:31] So it doesn't pass the sniff test with economics to say that because there's 5 gigawatts of Bitcoin mining coming to Texas, then there's going to be absolutely zero generation. There's going to be approximately 5 gigawatts of generation. Perhaps not exactly 5 gigawatts, maybe a little bit more, maybe a little bit less, that follows that because there is increased demand. And there are incredible numbers of solar developers, natural gas, combined cycle... They're very cognizant of this, and they're investing in generation assets as we speak. So I don't know why you don't think that the generation will follow the the demand. It's economics.  
 
 

[00:54:12] Ben: Let me say one more thing, Richard, then you go to your next thing. But the economics thing doesn't hold in energy because absolutely. I know that the basic kind of one-on-one principle that if there's demand there will be supply. But the whole point that I'm trying to say is the reality in the power industry, which has been the case for years now, is that there are constraints in how fast you can build things, including things like supply chains, the availability of tax equity, the processes of utilities and doing interconnection processes. Those are the things that gate the supply side.  
 
 

[00:54:41] Lee: Those same factors gate the miners in the same way. So, like the interconnection stuff and the miners are slowly coming online at a similarly slow and gated pace.  
 
 

[00:54:51] Ben: And if we're eating up all the renewables as fast as the renewables can be built the mines eat them up so that's, you know, we are back to where we started.  
 
 

[00:54:58] Lee: Well, but the renewables wouldn't be built if the mines weren't there that's, they don't have the financial incentive to let me talk to the renewal developers. If we had a renewal developer on the call, they'd say they only build when the economics of it makes sense.  
 
 

[00:55:11] Ben: It's not true. I work with, and I talk to developers all the time. I work with analysts on wind and solar who talked to all developers globally. There is absolutely price signals that exist in Texas that have existed well prior to Bitcoin mining. There is on the order of 700 gigawatts of renewable capacity sitting in interconnection queues in the US part of that in Texas for years, because the price signal is there. They want to build. It's economic to build. But they can't build because of those other factors. So it's just those physical, real-world limitations that are gating it, not some sort of price signal signal that that is lacking. And that Bitcoin mining will kind of magically create.  
 
 

[00:55:49] Richard: Okay.  
 
 

[00:55:50] Lee: Well there's about 20 gigawatts worth of wind in the interconnection queue in Texas, and guess who those wind developers want to work with the most. They want to work with Bitcoin miners because it provides them the greatest financial incentive. The payback on just locating in west Texas and hoping you can sell some power on the 12 gigawatts worth of transmission lines that exist to the power off-takers is like, you know, massive number of years. 
 
 

[00:56:16] I'm sure the analysts that you work with could tell you the number of years. But if you combine that with a on-site off-taker like a data center or a Bitcoin miner, the payback period is is drastically reduced.  
 
 

[00:56:30] Richard: Let's pivot the conversation to... 
 
 

[00:56:34] Ben: Right. But there's no value for the energy. Go ahead, Richard.  
 
 

[00:56:35] Lee: But again, you're bringing back the value question. And Richard has precluded us from talking about the value of Bitcoin. And I would love to talk about the value of Bitcoin.  
 
 

[00:56:44] Richard: Oh. Sure. Let's do that. But let me just ask you one other thing which is sort of related to what we were just discussing. This is a pragmatic issues, right? So in February, 2021, the state of Texas suffered a major power crisis. So severe winter storms, 4.5 million homes and businesses without power, 200 some odd people killed directly or indirectly as a result. Now, regardless of the root cause, the fact is demand spiked in the cold snap, and then there was insufficient power to meet that demand.  
 
 

[00:57:08] So what does that say about the optics of ramping up, say Bitcoin mining that could potentially be taking the power away now, regardless of how Bitcoin mining machines could be turned off in a second notice therefore not contributing to the power surge? But what does that say about optics practicality about the government's endorsement of the industry, especially in the state of Texas after the fiasco in 2021? This is a question for Lee.  
 
 

[00:57:35] Lee: Yeah. So every time the miners have been asked to turn off, they turn off. So that is generation that otherwise wouldn't be there. So if a miner is online and they're 300 megawatt mine. If they're not online in the days and weeks before then that generation is idle. It's either not producing, like it's a peaker plant or it's generally it's going to be as Ben has said, wind and solar is always producing. 
 
 

[00:58:04] So they're pulling power in the days and weeks before. And so therefore they have the ability to then turn off and that power goes elsewhere. If that miner is not there at all, then a good bit of that power will just not have been generated. It wouldn't be a dispatchable at a moment's notice. 
 
 

[00:58:24] So I think the optics are great for the industry. Just to have that flexible load is a huge tool in ERCOT's tool belt to be able to... I mean, that is doing the same thing that as a battery does. yeah, Bitcoin mines act like a big battery. Batteries are expensive to build. They cost a lot. They take a lot of rare earth metals, and they're not producing any economic output when you're not using them. Whereas Bitcoin mines do. 
 
 

[00:58:56] Richard: Okay. Go ahead Ben.  
 
 

[00:58:57] Ben: So I mean, um, the notion of a Bitcoin mine as a battery is, a little bit crazy. I mean uh, sorry. A mine is... It's more of a drain. It's like you can consume tons of electricity at a given time, or you can kind of like shut off the drain or draw a trickle, which is obviously you're kind of doing no harm at that time. 
 
 

[00:59:16] So absolutely. I would stipulate when mines exist, if you stipulate that they exist and are massive energy consumers, then it certainly is a relative help for them to wind down, or to go offline or ideally to zero during these peak times. So that is a help. But when you start from the beginning that they could not exist at all, you're in a much better situation. And that the battery thing, when you can't compare them to storage on the grid, because it's a whole separate conversation.  
 
 

[00:59:43] Lee: Well, there's not enough battery capacity though. I mean, True. But it's not doing what a battery is doing. You're right. You're absolutely right.  
 
 

[00:59:53] When ERCOT needs somebody to fix a, "Hey, we're down to 3000 megawatts of spare generation capacity." They don't turn to any battery people. Because batteries, there's just not enough battery generation in Texas to make a dent. They talked to bitcoin miners and they dispatched that load.  
 
 

[01:00:10] Ben: You're right that we need more batteries in Texas, which would actually meaningfully improve the supply balance. Battery, what they do is they enable renewable generation to always be maximal in order and be soak up by the battery. And reexported at other times, when there's less renewable generation, let's say at night when the sun isn't shining. 
 
 

[01:00:28] So batteries directly enable the growth of renewables. They reduced dependence on transmission. They're being used creatively by utilities all over the country to improve how much renewable capacity you can have and how little transmission you need. So batteries are extremely valuable. 
 
 

[01:00:45] We need more of them in Texas, and we also need long duration storage, long duration batteries, which is a newer variant, which enables storage over not just kind of up to four hours, but even over days, which is going to be critical to kind of getting to net zero goals and massive renewable deployments. 
 
 

[01:01:02] But I just want to be clear that Bitcoin mines are not batteries. They don't function in any way like batteries, they just consume. So they can consume a lot or they can consume a little or zero, but in no way are they improving things only when they start as a massive burden on the grid and over, you know, a handful of times in the year turn off. Yes, that's great, compared to being a massive burden. But you still started as a massive burden. You didn't start from zero.  
 
 

[01:01:29] Richard: Let's go to audience questions. So one person actually did ask about Bitcoin's as a societal good. So this person says it feels like most of these debates collapsed to whether BTC is essential. If it is, then it is worth the sacrifice on the grid. If not, then no. Again, I think this goes slightly beyond the scope because we're discussing whether Bitcoin as a widget is good or not for the grid. But I think we've kind of beaten the horse to death at this point. 
 
 

[01:01:53] So maybe Lee, if you want to talk a little bit about Bitcoin intrinsic value and why any kind of sacrifices worth making. Well, I guess to your point, it's an extra gravy to the benefit it is bringing grid. And feel free to make your case. And sorry, I cut you off. Feel free to continue on your stream of consciousness. But also maybe answer the question from the audience member about BTC's worth as a societal good.  
 
 

[01:02:17] Lee: Sure. When we think about how we use energy, we need to, as a society use, not only market forces but also look beyond the market forces, cause markets aren't always... They're not infallible. 
 
 

[01:02:34] They're pretty good allocators of resources, but they're not perfect allocators of resources. So we combine market forces with looking at the value for society of a particular consumption. And an asset that is native to the internet. That is the first asset in the world that creates digital scarcity, where you can limit the number of an asset. It's a macro store of value, similar to gold. And functions much more efficiently than gold. And in fact uses way less energy than gold. Way less energy to store it, to mine it, to transport it, all those things. And it works better in our digital economy as a collateral source, like gold is often used.  
 
 

[01:03:21] So, I think if we talk about banning Bitcoin mining and Bitcoin as a valuable asset, we should first look at... Okay. What does it make more sense? Does it make more sense that we carry around bars of gold in 2022? Or we trade ETFs and we mine gold and we do all these things with gold, that's been historically a great asset for millennia. That is gold inarguable, that it is a valuable asset to society over the last thousands of years. 
 
 

[01:03:50] But where we are today, Bitcoin is just, it's more efficient. And does everything better. It's cheaper. It's faster. It's internet native. It's uncensorable. It has all these properties similar to gold. And it consumes way, way less energy. So if we're really concerned about the climate, we should just ban gold mining instead of then banning Bitcoin. Because gold mining consumes far more energy than Bitcoin.. 
 
 

[01:04:17] Ben: I think, I mean, I guess I don't, um... this notion of digital scarcity and, or as a value. I guess just kind of, I scratch my head a little bit. Like I don't see why the world needs another kind of artificially scarce thing that we can claim has value without really doing anything and how that kind of solves a problem that we have. We have enormous kind of climate related challenges that we've talked about that on the energy side, and I'm not going to get into like gold versus Bitcoin because that, just to me, to the side of these things.  
 
 

[01:04:48] In terms of the value of Bitcoin and whether it's worth all of this enormous energy. I look at the natural, like economic substitution here. Which is other cryptocurrencies that don't use proof of work. That use let's say proof of stake, like Ethereum doing its migration. You have Ethereum is a another massive cryptocurrency with significant following. It is much more flexible and powerful than Bitcoin because it has smart contracts. 
 
 

[01:05:11] You can do a lot more with it, functionally. And it has none of this energy consumption. I don't see any sort of superiority of Bitcoin over Ethereum except the uncertainty of its consensus method. And I'm not enough of an expert on how uncrackable proof of work versus proof of stake or proof of authority, proof of time, all the different consensus methods. I don't think anybody really knows exactly how unbreakable these other ones are. Although I will say that as people have pointed out Ethereum under proof of stake has been hammered by all kinds of attacks at all times, and has stood up over the last few months, at least. 
 
 

[01:05:49] So if that holds up and proof of stake turns out to be effectively as good as proof of work in terms of fending off, essentially 51% attacks then, I don't see why we won't naturally jump to something that is more feature rich and has zero energy costs. It's like the most kind of mind numbing or kind of a brain-dead kind of like decision to make. So to me that is the kind of obvious off ramp than comparing Bitcoin to gold.  
 
 

[01:06:18] Lee: Well, I think if you compare Bitcoin to Ethereum, some of the things that you were talking about are kind of right up my alley. And we talked about demand response and power, which is kind of your background. There's this thing called the blockchain trilemma. You have security, you have scalability, and you have decentralization. And no one blockchain can have all three, to the extent that you would want it. 
 
 

[01:06:40] Bitcoin is optimized for security and decentralization. And Ethereum, it's not yet moved to proof of stake. They'll move over in Q3 is the latest projections. At Q3 of this year. They are optimizing for scalability and they're giving up a little bit, quite a bit in decentralization and they're giving up a little bit of security. 
 
 

[01:07:01] Now. It may not matter. You know, Ethereum may not be hacked on the proof of stake, that's possible. But what they've certainly given up is decentralization and decentralization is key for a censorship resistance. It's key for democratization of finance. Ethereum at proof of stake will basically be, if you have more money on the network, your vote matters more. 
 
 

[01:07:24] And to me that doesn't sound like democratization of finance. Whereas in Bitcoin, it doesn't matter if you have one Satoshi, which is one, 1,000,000th of a Bitcoin, or you have a full Bitcoin or hundreds of Bitcoins or thousands of Bitcoin. You are equal on the network and your transaction has equal authority to be ordered by the miners. And then therefore, the ledger to be updated all the nodes. I definitely would say that Bitcoin and Ethereum are just different. I'm not saying Ethereum's bad. I'm not saying that proof of stake is bad. I'm just saying it's not as decentralized and it's not as secure and I'm not going to put my. 
 
 

[01:08:00] Uh, you know, I may buy a little bit of Ethereum here and there to do some things on DeFi or various things. But the vast majority, if I'm storing wealth, I'm not going to store it in something that is less secure and less decentralized. I'm going to store it in something that's more secure and more decentralized  
 
 

[01:08:17] Richard: Okay. Great. So we actually do have a proof of work versus proof of stake debate by two practitioners in the space, two protocol developers. So, audiences interested should check that out. 
 
 

[01:08:28] I think it's time to move to the concluding remarks. We've had a very robust debate, covered a lot of ground. It's time to synthesize your thoughts and maybe also bring up a few things you've picked up from your opponent. Since you started, Lee, let's have Ben begin with the closing remark. 
 
 

[01:08:45] Ben, go ahead and tell us what you learned from the debate. Whether you moved your position, even if slightly, and give the final spiel about your main positions.  
 
 

[01:08:56] Ben: Sure. And it was a pleasure participating. I think Lee did as admirable job as possible defending his side of the argument which I just fundamentally disagree with. I think I agree with what he said, that if you view Bitcoin mining on the same level as decarbonizing our homes and our businesses and our manufacturing, then I would stipulate a lot of what he said. 
 
 

[01:09:17] And then I would absolutely cheer co-locating a Bitcoin mine with a wind farm out in west Texas. But to me there is absolutely no question that something that essentially functions as another form of gold that is just inner and stays there and is a determinitive source of wealth without much function is nowhere in the stratosphere of being as important as those other goals that we have as society to, you know, fight climate change. 
 
 

[01:09:43] And so fundamentally when you disagree on that level and you have my view that it is nowhere near the same value, it is a massive burden on the grid. It raises energy prices on consumers, which, I think we stipulated at least in the context of New York. 
 
 

[01:09:58] It raises emissions because whether or not it's using clean energy, it is forcing additional generation at any point in time. This is more expensive generation. It's more emissions intense. And it also uses transmission and distribution more heavily than otherwise would. So basically it's a massive burden on the grid, raising costs while taking resources away from other societally important purposes in my view.  
 
 

[01:10:25] So I very fundamentally think it's quite honestly a somewhat dangerous kind of view to claim that it is helping the grid, which is just to be the polar opposite. And so I fear that we are entering a regime in the US where certain governments are having open arms to Bitcoin mining with significant implications for meeting, our climate goals, and the benefit of people. And so I think it's very important for people to look through some of the minutia and some of these kinds of arcane arguments we've made and just see the very fundamental reality that this is a new source of energy demand that is massive and largely dirty. And is the quite opposite from being a help to the grid.  
 
 

[01:11:11] Richard: Okay. Thank you, Ben. Lee, your turn for the closing remarks please. 
 
 

[01:11:16] Lee: The argument that Bitcoin is bad compared to our goals in climate change, again, I think is a little bit outside the scope. But if we're going there, I would say that bitcoin has massive potential to increase human flourishing, as an asset class that is uncensorable. That is democratized, it as accessible to everyone. That disintermediates banks and other institutions that have not always served the society as equitably as they could have it certainly their valuable resources to society, but Bitcoin provides an additional benefit to society. And in regards to the grid, it's specifically if we're talking about the ERCOT grid. I don't want to speak too internationally. But if we do think about internationally Bitcoin again, uses 0.01% of the global energy consumption. 0.01%. 
 
 

[01:12:20] If we want to train our concern for the climate, at a particular industry, we should look at extractive industries. We should look at coal in India or what China's doing. 0.01% is a rounding error for most other industries in the world. And in particularly in Texas case, all we need look no further than the Texas grid operator, which has unequivocally said that bitcoin mining is helping bring grid resilience because it is a controllable load.  
 
 

[01:12:50] So, if the grid operator, which is pretty indifferent to these arguments about whether Bitcoin is good or not for society, they just look at what's going to make the grid more reliable. And we're trying to create a flatter demand curve that makes planning and operating a grid easier and more efficient, then we need to look no further than the Texas grid operator, which has recognized the benefits of Bitcoin mining to the grid. And not only in Texas, but also around the world and particularly in jurisdictions that have deregulated energy markets. 
 
 

[01:13:27] Richard: Great. Thanks for joining the debate today Lee and Ben. How can our listeners find both of you and follow your work? Starting with Ben.  
 
 

[01:13:35] Ben: Well, I guess you can find me @BenHertzShargel at Twitter, on my LinkedIn page. And please feel free to reach out. I'd be happy to engage anyone on any of these issues.  
 
 

[01:13:43] Richard: Great. How about you, Lee?  
 
 

[01:13:45] Lee: Yeah, I'm @lee_bratcher on Twitter and texasblockchaincouncil.org is where you can find me online. 
 
 

[01:13:52] Richard: Great. Thank you. So listeners, we'd love to hear from you and you have to join the debate via Twitter. Definitely vote in the post debate poll and feel free to join the conversation with your comments on Twitter. We look forward to seeing you in future episodes of the Blockchain Debate Podcast! Consensus optional, proof of thought required. 
 
 

[01:14:07] Thank you gentlemen so much for coming on the show. 
 
 

[01:14:10] Lee: Thanks, Richard. Thanks for the conversation, Ben. 
 
 

[01:14:12] Ben: Yep. You too, Lee. Thanks a lot. Thanks to you, Richard. 
 
 

OUTRO 
 
 

[01:14:15] Richard: Thanks again to Lee and Ben for coming on the show.  
 
 

[01:14:19] I think the main benefit for the grid mentioned in today's debate is this: Bitcoin mining creates extra demand for power, and incentivizes developers to build more power generating plants. I will let the listeners decide if this is good for the energy infrastructure. 
 
 

[01:14:38] What other takeaways did you get from the debate? Don’t forget to vote in our post-debate twitter poll. This will be live for a few days after the release of this episode. And feel free to say hi or post feedback for our show on Twitter!  
 
 

[01:14:50] If you like the show, don't hesitate to give us five stars on iTunes, wherever you listen to this. 
 
 

[01:14:55] This will help me reach more people and educate them about the blockchain industry.  
 
 

[01:15:00] And be sure to check out our other episodes with a variety of debate topics: whether Bitcoin is a true store of value, the legitimacy of smart contracts, decentralized finance, POW vs POS, the merit of economic bailouts, the case for central bank digital currencies, and so on. 
 
 

[01:15:17] Thanks for joining us on the debates today. I'm your host Richard Yan, and my twitter is @gentso09. Our show's Twitter is @blockdebate. See you at our next debate!