Video Length: 1:04:18
Kevin Whitmore: All right. So kia ora koutou. I'm pretty excited about today's session. It's been a while in the, in the making. So today we're here to talk about balancing New Zealand's energy asymmetry using carbon negative Bitcoin solutions. Well, we'll be talking about some of that, but also more broadly, I guess, New Zealand's energy landscape and what Bitcoin can do to solve some of the, the, the problems or the imbalances that exist.
Very excited to have both Daniel and Simon today to discuss these topics. Be great if you could both sort of launch into a bit of an introduction, maybe from sort of a professional, but also a personal lens in terms of how you got involved in these spaces, because I know both of you kind of came at it from a, from a different position originally. Simon, do you want to kick things off.
Simon Collins: Sure thing. Yeah, so look so I'm obviously, as, as on the screen CEO or managing director of Stackr, and we're a small, but growing Bitcoin mining startup in New Zealand, and we're really focused on it's our mission to bring hash rate to New Zealand. And and we believe that's a really strategic and economic economically important slice of the economy to have in this country and we simply don't have scale Bitcoin mining in this country, which means we're leaving a huge amount of wealth on the table. And we're we're exposed when the rest of the world and when you know, the number would go up and Bitcoin becomes, you know, financial infrastructure for the entire world. If we don't own a piece of that, that's really expensive for New Zealand to have to buy its capacity from elsewhere.
So it's really important to us to bring Bitcoin mining to New Zealand. It's also really important to us that we only mine Bitcoin with renewable energy. It is a very fair criticism of Bitcoin that It's energy intensity is high per machine. Now you can talk of all you want about what the coin's energy use looks like and it's proportionality to the value it creates.
And obviously I'm on the side of the fence that suggests or, or believes that it's extremely well used energy. But I and we at Stackr, believe it's really important to source energy responsibly and thoughtfully and in ways that's not harmful to first of all other users. Second of all to the grids that you're sourcing energy from and third to the country and planet.
It's a fourth to the planet that you live on, and that's why we are entirely focused on sourcing energy from renewable generators. I have been a miner for a very long time, a hobbyist miner and then I was approached to, to set up Stackr during kind of the mining gold rush at the end of the last Bitcoin cycle, and it's kind of through pure tenacity and and careful kind of positioning that we've lasted through this bit of the cycle so that we can be well positioned to grow in the next you know, in the next phase.
Kevin Whitmore: Awesome.
Simon Collins: Yeah, that's us.
Kevin Whitmore: Thank you, Daniel.
Daniel Batten: Yes, well, I came at this from a technology lens primarily, so I've been involved in running technology startups and then doing impact investment and then climate investment. And I basically had two communities of people. I've also been an environmentalist since already since I was about four years old in many ways.
We might get onto that story later. But I had two communities of people who, one community, who was my environmentalist friends, part of Greenpeace, who were saying Bitcoin's terrible for the environment.
And Bitcoin, we both ran technology companies together, we're saying Bitcoin's wonderful for the environment. And you should look at it as a climate tech solution. And I thought being a technology investor, you don't trust anyone. So you do your own due diligence. So that's what I did. And I spent a while doing some research on it and came up with some conclusions that I'll share with you.
So I didn't come in it as a, as an early Bitcoiner, I came in very much from the outside, very neutral perspective, just curious to find out the true environmental cost or benefit or combination of this technology.
Kevin Whitmore: Awesome. And yeah, as we discussed, I think, yeah, so Daniel, you started from the, from the energy environmentalist side of things and, and came into the Bitcoin space from there. I think Simon, you were the other way around. Is that right? In terms of started with Bitcoin and, and then approached the energy sector from there.
Simon Collins: Yeah, that's right.
Kevin Whitmore: Just for some, some, I guess, ground background setting today my background is, is very much more from the, from the Bitcoin side, and I'll be sort of taking the Peter McCormack equivalent of asking silly questions about the energy sector, because I'm, I'm not so experienced in that space so we'll, we'll, we'll go from that lens, but yeah, I think energy has just become one of those things that you've kind of got to know about it.
Whether if you're in the space it's, it's obviously become quite a tribal religious sort of space in terms of people and their beliefs and crossing over with sort of various personal belief systems and things like that. And energy seems to be 1 of the things that's very much at its core.
Kevin Whitmore: And as Daniel mentioned, you're in the, you come at it from a sort of an environmentalist space. What, what's your current response when you hear that someone says, you know, bitcoins boiling the oceans and it's a waste of energy and things like that. I mean, that's, that's probably something you hear a fair bit.
What's, what's your current, current response? And maybe we start with Daniel in terms of when you hear that, that critique.
Daniel Batten: First thing is empathy with why someone would think that because I'll be honest, that's what I first thought when I first came across Bitcoin. Because like a lot of people, I outsourced my formation of a belief system to people who I trusted, who are writing articles in seemingly reputable newspapers.
But when I looked at it more deeply, what I realized was that a lot of the people writing about Bitcoin were only recycling mythology. Or they were presenting a viewpoint, which was out of date and hadn't reflected changes and what was fueling the network or worse in some cases were recycling some fairly vested interests against Bitcoin because you've got to remember as a technology Bitcoin disintermediates a lot of people.
It threatens central bankers, number one. That's why it was invented. It threatens a subsection of bankers. It threatens part of the power of central government. And so you have some very powerful influences who don't want to see Bitcoin win. And the more I looked into it, the more I saw that they were having quite a large say on the narrative.
But when I looked at it from first principles, I ended up doing some research and finding fairly quickly because this is what you do when you're a venture capitalist, right? You just trust everyone. You look at your own numbers and you make your own assessments, but the data was pointing to a very different narrative.
And what we found was that Bitcoin was actually playing a role in load balancing grids. We found that it was going to be essential to the renewable transition for some reasons and nuances we can get into later. We found that it was the number 1 user as an industry of sustainable energy and the rate at which it was growing was huge.
Not because Bitcoin is for environmentalists, but simply because they source the cheapest source of electricity. And today that's always renewable and that's always stranded. So there was some massive accidental advantages, as I say, not because Bitcoiners were necessarily more green than other users.
I think they're the same as any user of electricity, but simply because coincidentally, the incentives aligned such that it really made sense for them to, to hunt and scavenge for the cheapest electricity, which is always renewable. So as it stands today, that's a very misinformed narrative. And what I often do is I just kind of suss out whether someone's already baked hard their belief system.
If they have, it's like talking to a climate denier. Frankly, I won't waste my time. But if someone's open to having an informed discussion and talking about facts, as opposed to mythology, then I'll quite happily just take them through what I learned, because I used to be in the same position they are believing exactly what they believed.
So, like I say, whilst I don't agree with the perspective anymore, there was a time when I did. I understand why they think that way and and what I endeavor to do is to walk them through the process. I went through where I came to a different conclusion just through being intellectually curious.
Kevin Whitmore: Awesome. Maybe a question for you, Simon. Do you sometimes wish we'd used a different term to mining? And I just, I ask that question just because it's, you know, analogous to gold mining or lithium mining and all the images that kind of conjures up.
Simon Collins: I think, I mean, I, I can't, I can't qualify this, but I think it probably has done.
Other than the Silk Road being the first use application for Bitcoin, it's probably done the most damage to Bitcoin is, is the kind of pejorative naming of Bitcoin mining as mining because of the inherent connotation that comes with it, right? Like, mining literally devastates ecosystems for profit.
And is an entirely extractive process. Whereas Bitcoin mining or proof of work computing, as I, I tried really hard in the early days of Stackr to when we were talking to people, it was to just talk about proof of work. But the reality is you had another uphill battle, which was to explain what that is.
And then you go, Oh, it's also called mining. And then they go, Oh, well now I understand. So yeah, but I think it's done a huge amount of damage because it also carries, so it carries that environmental and extractive kind of connotation. But then it also has this kind of connotation of pure randomness and luck in in how you are rewarded by the process.
And people genuinely do believe that these massive warehouses, these mobile container farms or, or sets of con you know, mo mobile mining containers are literally just random chance of winning. You know, like that they're all out there trying to win a lottery every day that only they're, you know, able to buy tickets for and that the only way you're awarded is in these massive explosive gold rushes of, of Bitcoin and every other drop or every other, every other watt of energy that's that's injected into the system is wasted if you're not the winning computer.
And again, that's another piece of kind of mis education or, or misunderstanding that is very hard to counter because it comes with a relative amount of, complexity in the same way that the complexity of blockchain proof of work and cryptography kind of intersects and creates Bitcoin.
It's a, there's some, there's a cognitive barrier for people to get over because it's such a difference in the way that people are used to things working. Encryption and security as a software based thing. Well now you know, Encryption and security is actually a physical thing and it's in the, you know, the energy produced and used to create hash power.
So, yeah, I think it's a really damaging choice of name for what we do as a business.
Kevin Whitmore: Awesome. Thank you. I'm just going to jump into the main topic. And I've pulled out some again with my novice hat on some some general New Zealand statistics in terms of the energy landscape. And these are as of 2021, and I found these quite interesting just kind of going through it and doing some pre reading prior to this session. So I think you both might know the current numbers or more up to date numbers, but as of 2021 my understanding is 82% of our electricity was produced using renewables in New Zealand. 57% of that was through geothermal which is an increasing number year on year.
Hydro is a flat source so it's around 24-25% but it's decreasing overall as a total share in terms of our energy production and then wind and solar are minuscule. But they have a pretty decent compound annual growth rate around 14%. So that those were sort of the numbers that I pulled off MBIE's energy in New Zealand 2022, which was actually for 2021 document.
And that's just around the production side of things. And that's just around electricity. So I think overall 41% of our energy is produced from renewables, 34% from oil, 17% from natural gas, 7% from coal, and 0. 1% from waste heat, which I thought was good that they had that in that that report as well.
But then in terms of consumption, we've got 50% is oil. 26 is electricity, 13 is natural gas, 7 comes from other renewables, and 4% is coal. So coal imports actually reached a high of 1. 8 million tons in 2021, and we're continuing to increase our imports, which was interesting. So I think, yeah, I just went looking for those numbers. It would be good to kind of understand more broadly in terms of the current scene for New Zealand in terms of the South Island, North Island dichotomy of, you know, net producer versus net consumer.
Daniel, do you want to kind of lay the scene in terms of kind of where that sits at the moment?
Daniel Batten: Yeah, New Zealand is interesting because you have the benefit of having a backbone, which is a lot of controllable renewable energy. So that's, that's an advantage. Because we have so much hydro we're in the situation where we have, it's a more controllable load than wind or solar.
You can't go to a solar producer and say, Hey, can you turn up the sun. You can't go to wind producers say, Hey, we need more wind today. It's not possible. So building a grid based on intermittent variable renewable energy is really tough for grid owners. So we're quite fortunate.
There's a disadvantage, which Kevin alluded to, is we have this geographical asymmetry. So, which is just a fancy way of saying where we produce electricity is different to where we predominantly consume it. We produce a lot of it in the South Island, we consume a lot of it in the North Island.
You might think, oh, that's okay, we've got these big transmission lines, we've got these pylons, we can transmit it from one point to another. Yes, you can. However there's you lose a certain percentage during transmission, but also you get into trouble with voltage regulation when you're transmitting.
And I won't get into the physics of why that is frankly, because I don't understand a lot of it and I don't need to understand a lot of it. All I need to understand is that it is a problem when you transport electricity a long way, you get into problems with voltage regulations. So to give an idea, there is, there is a widget, called a statcom, which is produced by a large German manufacturer, which costs multiple tens of millions of dollars, possibly more, which has no function other than to regulate voltage, right? When you have these massive asymmetries between where you produce, And where you consume electricity, just it's part of keeping the grid stable. One is stabilizing the frequency, but another is stabilizing the voltage when you have this geographic asymmetry.
Now, that's a perfect case where you could actually use something like a controllable load to do the job instead of a statcom, which has, as I say, no functional usage apart from controlling voltage. So with flexible load consumers, they will have the benefit that number one, you don't have to pay a huge amount of money to, to get them on your grid.
In fact, the opposite, they're actually a consumer of electricity, so they'll pay the grid operator money and yet as a byproduct of what they do, they can serve that same purpose of voltage regulation. And it just so turns out that Bitcoin mining is not only one of the best ways to control the frequency, which is just matching supply and demand, but it's also an exceptional way to control voltage as it transmits over long transmission lines.
So, so that's one thing that one way that Bitcoin mining can be used in New Zealand, which is different to say in Texas, Texas, they have that problem to some extent, but they have a bigger problem, which is most of their variable renewable is wind and solar. So their big problem is most of that gets curtailed, it gets wasted, it gets spilled into the ground.
So, and they also get these huge imbalances where when demand spikes. They can't just release more water over the side of the dam, or they can't just crank up a natural gas station because they don't have enough relative to the wind and solar. And as we said, we can't ask the wind and solar producer to produce more wind and sun.
So the only recourse they have when they get these big demand peaks is to rather, well, they can do two things. Number one, they have a gas peaker plant, which is permanently online. Fossil fuel based having to idle the entire time throughout the entire year, just for these fractions of the year when it's needed.
So it's hugely wasteful, hugely expensive, they cost billions of dollars and it's adding fossil fuel to the grid. So what it means is you cannot decarbonize your grid because as you put more variable renewable on it, the grid operators are having to say, okay, for every 10% extra variable renewable, we need these more gas peaker plants just for the time to control when we get these demand peaks.
Well, that's not decarbonizing the grid. So, in Texas, the issue with what you can do is you can have controllable load resource and we can talk more about that later. But it turns out that the, the Rolls Royce of controllable load consuming is Bitcoin mining for a number of different reasons.
So, as I say, that's not so much the case in New Zealand. New Zealand, it's more about voltage regulation is one huge advantage. There's others as well, but that's just the one that falls off the back of the challenge that Kevin was mentioning with where we produce electricity and where we consume it.
Kevin Whitmore: Nice. Anything to add there, Simon?
Simon Collins: Yeah, I, so, so, you know to Dan's point with variable renewables, the average base load for a wind farm is 30 to 40%.
So if you build 100 Turbines, you can expect 30 to 40 of them to be spinning and generating at any one time. And that's kind of how the economics for that work. So yeah, so to decarbonize the grid and to genuinely produce enough energy to match the absolute maximum that the system could draw at any one time, you have to massively overbuild your variable renewables to do so.
So, you know, you'd have to build, you know, 2. 5 X times as much wind to capture all of the, all of the demand from the grid. So yeah, it is that and so obviously there's an opportunity for Bitcoin in there to buy every excess watt of energy if you overbuild to meet or to meet the demand requirements of a grid.
So that's, you know. It's such a no brainer from my perspective. But unfortunately, you know, grid operators and generators still kind of across the line on that. And and I'm sure we all know why. The other thing is just going back to your statistics was the energy versus electricity in those numbers is really important because a huge amount of the oil consumed in New Zealand is for transport. That's cars, trucks, et cetera, who use that use petrol and stuff. But very critically they're very quickly becoming electrified. And it's the same with those coal imports as well.
Coal imports have peaked over the last 12 months, and a huge amount of coal consumption in New Zealand is off grid energy. It's like Fonterra plants that are still coal fired. It's greenhouses, all that kind of thing. And so they are slowly being bought on grid, which adds more demand to the grid.
And New Zealand has a problem, which is that and this is in any number of reports from MBIE, Transpower and the like, we are simply not attracting enough investment in renewables to meet the increase in demand for energy in this country. So, as we buy electric cars, as we take plants and greenhouses to electric sources of energy, we aren't matching that with the rollout of new renewables.
And what we really need to do is get very serious about how to bolster the economic case for new renewables deployments. And the really obvious option here from my perspective, again, obviously is, is to add Bitcoin at the base of every wind turbine, you should have a matching capacity of Bitcoin mining that allows the monetization of every watt of energy that isn't demanded by the grid during peak times.
Kevin Whitmore: Awesome. So, I mean, obviously both of you are sort of working in different capacities to do, you know, things in this space. What would your suggestion be to Both the government, but also to, I guess, the power companies as well. The, the bigger, the larger ones. What, what would your suggestion be to, to these entities in terms of what, what we could be doing for New Zealand as a, as kind of a, an opportunity or a solution?
Daniel Batten: Do due diligence on Bitcoin mining. It's quite simple. And look at it in terms of the problems that it solves.
So if you look at the problems, it is going to be curtailment. It is going to be profitability of renewable operation. It's going to be voltage regulation. It is going to be stabilizing supply and demand as you put more intermittent load onto the grid and it is making sure that you can load balance effectively so that you're not putting more price pressure onto residential users.
And so if you look at what those, those problems are, then it's just a matter of saying, well, how many of them can Bitcoin actually either solve, or at least be part of the solution to. And then, of course, a lot of people say, well, you know, we just have more batteries, you know, we solve the intermittency problem with more batteries that'll solve it.
Well, no, it doesn't solve it for a whole bunch of reasons. Batteries is part of the solution. Sometimes it's batteries. Sometimes it's green hydrogen, particularly if you have grids, which have massive differences between winter and summer supply, then green hydrogen can act as a really effective one semester battery.
But, and sometimes pumped hydro is a solution, but they're not always a solution. Pumped hydro needs particular environments where it's even economically feasible or logistically feasible. Batteries only gives you at best 4 hours of life or what happens if you have a 72 hour wind surplus. Green hydrogen is, is only about 30% energy efficient, so it's one of the least efficient ways to store energy.
So that only really works if you've got no other options and you're talking about over a long period of time. But you've got to look agnostically at what is the best fit for purpose solutions and to, to simply rule the technology out because you don't understand it or someone, you read someone who said something against it, Is is irresponsible.
You have to neutrally and agnostically appraise every technology on its merits in terms of which are the best solutions to can to actually answer the very real concerns that we have as a grid going forward. And the best thing about this is that it's not conjecture.
There, there are grid operators right now in the world, such as in Texas, who have already run this experiment. So it's not as if we're speculating here. We have some very reliable data in terms of what happens when you put Bitcoin onto grids, which are way bigger than New Zealand's entire grid. And we have that information, we have that diagnostic. So we run those experiments.
It would be totally irresponsible not to use that knowledge. So I would just say, Hey, tell us the problems and be open to listening agnostically to what part of the solution might be. And then we get some smart people like Simon in the room who can speak authoritatively to it.
Simon Collins: Oh, shucks. Yeah, it's interesting. I have had a couple of conversations recently with people in some of the large gen-tailers, and it's really fascinating to see their way of approaching this problem, which is, you know, as I've said, the electrification of the grid, increase in demand very, very hard to move new developments for for energy generation. And their solution is in trying to understand how consumers behave on the grid and are desperately trying to come up with solutions that will get people to charge their electric car at 3,4,5 o'clock in the morning, rather than 5 p. m. in the afternoon. That's desperately trying to get large commercial customers to move to, you know, off peak time.
So after 9 or 10 p. m. in the evening. And all of that assumes that there aren't human or commercial economic factors that drive the use of energy at that time. They just think that they can use price incentive to shift demand or even pure limit on what you're allowed to use. And this is a really important point that you know, basically in a lot of cases Bitcoin miners in New Zealand get the door closed on them for Discussion of can we buy electricity from you and can we buy electricity from you at wholesale prices because they're not interested in The implication they're not interested in Bitcoin. They're not interested in in you as a customer.
And What that suggests to me is that there is actually a battle here for what you're allowed to plug into the socket at your house. And that seems incredibly dangerous as a conversation to wade into because these entities are mostly 51% government owned.
So the government is actively deciding who gets to use electricity and not. And just like CBDCs, they can make decisions about what they consider acceptable use. Acceptable use for your money, acceptable use for energy. And that's a very, very concerning development for me. What makes a Bitcoin miner? I'm sorry. I'm probably getting a little bit on my hobby horse here. Cause I'm not very tall. It's not my high horse.
But you know, it's an extremely dangerous kind of distinction to be making between types of user of electricity. I had somebody point out to me that breweries produce a harmful output. Do power companies decide not to do business with them because there's harm involved.
You know, these are the kinds of conversations that have to be had in the short term. As Dan says, like the due diligence needs to be done because actual measures of harm versus actual benefits are not being reflected and The way generators are approaching this technology.
Kevin Whitmore: Sure. And education works best...
Simon Collins: Sorry, that was a bit rambly.
Kevin Whitmore: therefore is important. I think you both touched on it briefly, but I mean, the one that I hear a lot, especially in internal circles at Callaghan Innovatoin is is the storage space. And, you know, I think everybody agrees that increasing capacity for storage and the technology around batteries and the likes are very important.
But I think internally, that's often what we jump to immediately is how can you store more? What is the, the ability to, to improve from a technology perspective in that space? And, and topics like Bitcoin are still very new in terms of not many people have, have heard of them as a, as an opportunity yet.
Simon Collins: Well, batteries, batteries look great on the surface. They seem like the perfect, the perfect solution don't they like if there's too much energy being produced, you stick it in high capacity lithium batteries to release at times when the grid needs it. But as Dan Daniel says, first of all, they don't really store that much energy relative to what they can release later on. Most grids, it's about half an hour to four hours as, as Daniel pointed out. And the other thing is they're incredibly expensive per kilowatt or per megawatt to deploy. You know, they're, you know, what Bitcoin could do to soak up energy, excess energy at any time can be done at a fraction of the cost.
And we're talking below a 10th or even a fifth, even a 20th of the price to deploy that technology to soak up that energy.
Kevin Whitmore: So maybe we jump into this discussion because I think, yeah, obviously the challenges of Introducing new concepts to people that haven't heard of them before. And to Simon's point around, you know, who gets to decide what gets what gets used for what purpose is, is obviously a challenge. In terms of, I guess, the reputation and the branding associated with things like methane mitigation, methane capture I know Daniel has been spending a bunch of time at the moment, we can talk about your ventures shortly.
But I just thought I'd post this screen briefly. I think this is one from your, you're on the right screen. Is this the have you got an orange screen there? Yeah, cool. This is what I saw on, on Twitter, but I think that's off your website as well.
Obviously the, it shows Ethereum going to carbon neutral first, since the change to proof of stake, Bitcoin still obviously not there from a neutrality perspective, but then the next one obviously shows the the path to carbon negative with Ethereum not having the, the ability to go negative because of the fact that it doesn't mine anymore per se and it uses a different consensus mechanism.
Do you want to talk us through a bit about this opportunity and maybe more broadly, the, the methane capture opportunity, Daniel?
Daniel Batten: It's a dangerous question to ask. Look, I'll just give a very high overview because this is what I've spent most of my time researching over the last six months. Bitcoin is very unique in that it's one of the very few sources, one of the very few consumers of electricity in the world who is able to use emissions as a source of power, which is the ultimate, right?
Imagine if you could actually use actual emissions as a source of electricity, what turns out you can, because right now around the world, we have these three massive sources of methane emissions, agriculture, the oil and gas industry and landfills. Those are the top three. And long story short when you factor in some of the calculations which NASA has done across landfills recently, it turns out we've been underestimating our landfill emissions by a factor of more than two.
And when you correct for that actual calculation based on measured emissions, rather than inferred emissions from the EPA, and you adjust it, landfills still isn't the highest source of emissions, it's still agriculture, however, agriculture is growing at about 0. 7% per year, landfills is growing at 1. 4% per year.
Which means that within 10 years, guess what our number one source of methane will be? it's going to be landfills. And so that's a problem. And most of it is just purely venting into the atmosphere. And the United Nations has recently said that methane is our number one lever to reduce climate change.
Okay. So methane is our number one lever to reduce climate change. Within 10 years, landfills will be a major source of methane emissions, or who's doing something about that? That sounds like we should be doing something about that, right? Surely that's where a lot of the world's attention is going, right?
Well, no, it's not. And the reason our attention isn't going there is that it will require levels of international cooperation which would have been harder even when the world was cooperating with each other, let alone today, to regulate that, so that's not going to happen. It might happen on jurisdiction by jurisdiction basis.
That's going to be slow and painful. But there's been no economic incentive to do so because it's been too hard to capture those emissions. And let's face it, who wants to, any of you want to set up a business next to a landfill? Any takers? Want to set up a shop front there and start selling to consumers?
Maybe a hospital? You want to set it up next to a landfill? Well, no, neither does anyone else, but there are these weird, wacky, crazy people who would go to those lengths and that's because Bitcoin miners are not because they're averse to the smell. They don't like it more than any, any of us do, but because that 60% plus of their operational expenses come from electricity.
Name me another business in the world where more than okay maybe a few data centers, but even data centers relative to normal data centers, their their operational costs are so heavily weighted to electricity that they are positively economically incentivized to go hunting scavenging for messy, dirty, hard to extract sources of energy, and even to invest extra capital expenditure to get that electricity.
So, even if there is no electricity, all there is is some stinky landfill gas coming out, Bitcoin miners will be crazy enough to go, well, we can purify that. Landfill gas into biomethane, then we can put a generator on site and we can turn that biomethane into electricity and we can get some mobile mining unit.
So we can turn that electricity into Bitcoin. Let's do it and they'll look at the economic case and they'll work out. Okay. At this price of Bitcoin, it actually works. So that's tremendously positive because as I say some people say to me, well, that's not a benefit of Bitcoin. That's just a benefit of anything you could use that power for.
And I say yes, it is in theory, but no one else is going to use that power because the economics don't pencil out for most of these landfills. Some of them, you can sell it back to the grid and that will be a viable option. But in the United States right now, 70% of the landfills, you cannot sell it back to the grid because the grid would need a major upgrade to be able to handle that power, you know, just like there's a difference between upload speed and download speed on your internet.
There's a difference between what you can download from the grid power and what you can upload to the grid and you want to upload megawatts and megawatts of power that that's going to take some serious, you know, multi decker million dollar or centi million dollar substation upgrades and other sorts of upgrades in some cases, and it just doesn't pencil out.
So you're limited to having to have what's called an on site user and this is true not only with landfills, it's also true with wind farms. Well, you know, what happens when you're not tied to the grid where you can't sell that power back to the grid, you have to have an onsite user. And again, your options are extremely limited there to the ones who are crazy enough to locate themselves in the middle of nowhere next to a landfill next to a windfarm in the whops, wherever and Bitcoin miners will do it.
And so suddenly, for the 1st time ever, we have a viable solution where these incredible levels of methane emissions that are going into the atmosphere and growing rapidly. We have a solution to that. That actually makes economic sense for the 1st time since landfills were invented, and that's tremendously exciting.
So it's something that I spent a long time looking at what's the carbon impact? What's the emission impact? What's the economic impact of it? And you know, how many megawatts can you create and how many emissions is that going to mitigate? So it's a tremendously exciting area.
Kevin Whitmore: Cool, thank you. And just jumping in I would probably won't touch on this slide too much, but this is obviously...
Daniel Batten: Just to that question there with, with biogas, absolutely. You've got to not necessarily micro turbines, you're better off having something like a filter. You need to have blowers, you need to have decontaminations in some counts. Sometimes you have siloxanes. Even when you have all those additional complications it can still pencil out in many cases.
Generally, you've got to have at least 4 megawatts of power but we've gone pretty deep into the maths because we're looking at funding some of these ventures. And so we wouldn't be looking to fund it if it didn't pencil out economically.
Yeah, we'll just, yeah, we won't touch too much on this slide. Obviously, it's nice to finally have a like for like comparison in terms of energy mix. Often we hear, what was it? Switzerland, more energy consumption than Switzerland, more than your, your dryers at home, et cetera. But like, for like, in terms of sectors is, is nice to finally see not just from a overall consumption perspective, but trends in terms of the shift to sustainable components and also emission intensity over time. So thank you for that.
Simon Collins: Yeah, yeah. And really important. I, I the comparison to the use of other countries has always really bugged me because it's always countries like Switzerland Denmark, Ireland, all these kinds of places, which are not energy intensive companies, countries, these are countries who have all outsourced their manufacturing, which is the most energy intensive industry to China, Bangladesh, Eastern Europe, all those kinds of places. And so they're not really.
Daniel Batten: And then the remaining electrical power is mostly renewable.
Simon Collins: Exactly. So they're not really good comparators because they've outsourced the actual consumption of their energy to other countries. And so it's kind of, you know, it's drawing an arbitrary circle around what you're measuring and then, and then comparing it to an orange.
So that's just, that's just one of my little bugbears about this whole space. Sorry. So I like to get it out there whenever I can.
Daniel Batten: Yeah, happy to. So I'll just do a quick screen share on this. So Sometimes it's useful just to have an overview of how it works on the grid side.
So this is what I've put together.
Okay. Can you see that? Okay. Nice blank screen. Yep. Okay.
Great. So there's 3 things that need to be true in order for renewable transition to occur. The renewables need to be fundable. They need to be profitable and they need to be reliable. Okay. So it kind of seems obvious, but if you can't fund a renewable venture it's not much use. You can say, hey, I want to set up a solar farm tomorrow, you can put a year into into investigation. You can know technically about it, but if you haven't got someone to fund you, then it's not going to decarbonize the grid. So it has to be fundable.
Once it gets onto the grid, it has to be profitable because if it's not profitable, then it's not going to incentivize other people to follow, but also means you can't expand.
And the 3rd thing is it's got to be reliable and what I mean here is it's got to contribute to a grid, which is overall going to be reliable. The Texas grid, it's called ERCOT, Energy Reliability Council of Texas. The reason that reliability is so important is that when grids aren't reliable, businesses fail, people can die and grid operators get fired.
So when you have brownouts or blackouts, that's the last thing that a grid operator wants. So whilst They will be all enthusiastic at some level about variable, renewable energy. Part of them is also going great. So I've got more climate extremes than ever. And at the same time, you want me to put more intermittent load onto my grid, which is making my core job to keep the grid stable harder.
So, so how do you deal with those three things? So here's an overview. A lot of people say, look around the world renewable energy is going up exponentially. It's good to unpack what that means a little bit. Yes, there's an argument to say that if you look at the, the growth rates here, so this is not looking at the amount.
This is looking at growth rates. And so when you look at these nice charts that all seem to be hockey sticking upwards, the nuance that it misses is what's happening to the growth rate overall. And it turns out the growth rate has actually slowed since 10 years ago. The growth rate of solar 10 years ago, where was it?
Was up around 40%. Today it's under 30% and something similar has happened with wind. So why does that happen? Why are we slowing down at a time when we should be speeding up? And well, it's because we have these things called interconnection queues, where it can take, in the US, it takes around 3.5 years on average, 3.7 to get a, a new solar or wind project onto the grid. And if you think that's an anomaly actually in the UK right now it's upwards of 10 years. And that's because the grid infrastructure cannot handle this variable intermittent load without major reliability issues.
Okay, so that's, that's a problem and a lot of the money that's gone into sponsoring and subsidizing renewable development around the world in places like Spain, Northern Territory in West Texas and other parts of the world too has gone on without any thought about what the underlying grid infrastructure is to handle this additional renewable load. So that doesn't mean we shouldn't be doing the renewable transition. We should absolutely be doing it, but we need to have a very holistic view of what this does to the overall grid.
So, yeah, 15% chance of acceptance. That's in California right now. If you have a new, so you've got a 1 in 7, 1 in 6 chance of actually getting your renewable proposal approved right now and every 10% additional renewable energy on the grid variable renewable gets traditionally harder to load balance. So those are the issues.
So this is someone from J W, which is a Bitcoin mining company in West Texas. And they did some research into what Bitcoin mining could do, and they found that it was renew, it was reducing 4% of all curtailed energy. That's a lower threshold and then they did some statistics to find what did that do to the profitability and they found that actually increased the profitability of the renewable asset by 12%.
So it's quite substantial. And in most cases, that entire 12% is going to go into be, it's going to be reinvested into expanding and putting out more wind turbines or more photovoltaics. This is talking to the point that Simon was mentioning before about batteries. So in a net zero scenario, this is put out by the International Association of Energy.
A lot of people don't realize this. So what this is saying is you need batteries. But if you look here, what the IEA is saying is much more important than batteries is what's called demand response. And demand response means you have flexible consumers of that electricity that you can dial up or dial down at a moment's notice.
And when it comes to demand responses, there's three things that are really important. Number one, it's got to be immediate. If you have a spike in power, you want to immediately be able to dial someone down. The second thing it's got to be precise. You want to calibrate the level that you can dial down to.
So say you have a spike in electricity and you take an aluminum smelter offline to try and reduce demand. Well, you might lose too much power. Now you've got the opposite problem to try and counterbalance it the other way. So what you want is someone you can precisely calibrate down to exactly the right level so you can precisely match supply and demand.
And the third thing is you want it to be long lasting. So if you've got a peak demand, such an extreme weather event, it's really, really hot, really, really cold and people are using more electricity and that extreme weather event goes on for 48 hours, you want to know that your flexible consumer can stay with you throughout that 48 hour period.
Here's here's a case with Bitcoin. This was actual Bitcoin miners on the network in Texas during the winter storms. Over the Christmas period. And what this is showing, this is from Glassnode. So they map a whole lot of metrics on Bitcoin. This is hash rate. So hash rate basically measures the amount of compute load on the network.
And what it's showing is it's dropping here from an average of 250 and it goes right down to almost 150. So you've lost about 30% of the entire Bitcoin. This is global. 30% of the entire Bitcoin global network has actually come offline. And the reason that happened was that almost every single miner in Texas, which represents almost a quarter of global hashrate at the same time, they powered down to a bare fraction and they're able to do that immediately, which helped to stabilize the grid.
This has been widely reported and what's notable here is they did this, look at this starting on the 24th and going right through to the 26th. So it was across a 48 hour period. What's important here is that the previous choices we've had as flexible consumers have been places like steel plants because they can, they use so much power, they've been really good instruments for good operators to talk to and say, Hey, can you please power down?
We've got a peak demand coming up and they say, sure, but then you've got some problems and it's all three problems. Number one, it's not immediate. They need time to do it. They can't just switch off immediately. And you've got to go through a sequence of processes, so it might take half an hour. Second thing is that it's not precise.
So you lose too much power or maybe not enough. You can't precisely calibrate and get them to dial up and dial down. But the third problem is that metals start to harden after a while. So you can't have them do that for 48 hours. It can only buy you perhaps four hours of time. If it's a steel factory, steel starts to harden after four hours.
So it turns out that these Bitcoin miners, again, this is completely accidental. This was not why Bitcoin mining was invented. This is an accidental use that because of the unique nature of how they operate and how they function, they're the absolute ideal demand response consumer. So again, if we go back to our graph, demand responses.
A lot more than half of how we're going to meet our net zero emission targets and it turns out that the single base, the Rolls Royce as Sean Connell calls it of demand responses, Bitcoin mining, because of its unique characteristics. That was another period where they did the same thing and that's if we zoom out and we look at the impact on the entire bitcoin network over time. This is a slightly zoomed out chart, so it doesn't show the nature of the extent of this, the dip, because it's taking a 168 hour moving average.
Simon Collins: And Daniel, just, just before you move off that point, sorry my understanding, my recollection of those events in Texas is that the curtailment of Bitcoin mining was entirely Automatic and based on pricing signals from the grid.
So nobody had to pick up the phone and ring every Bitcoin miner and ask them nicely. The pricing on the grid sends signals to Bitcoin miners that it's no longer worth your time to do it because of the demand on the grids otherwise, and so that's switched off automatically because it makes no economic sense to stay online.
And so, first of all, that's a great system that enables the management of loads on the network as it currently exists, but it also suggests to me that there's another opportunity to build demand measures into the network that Bitcoin miners can use as signal too, which may provide even deeper integration to these grids that you would have, whether it was an agreement and you're in your PPA or whether it was purely just a measure of demand based on the need for demand response, you could build a very simple piece of software that just reads the demand signatures on the network and goes, this is starting to get towards peak demand. We'll need to scale back or curtail our mining until we get back to a reasonable sense.
Daniel Batten: It's funny you should say that because if you look over here on number three, so these are some tweets that I put out and this is some software which is doing exactly that. So it's sending that exact price signal message to the Bitcoin miners and saying, Hey, it doesn't make your above your break even it no longer makes sense for you to be mining switch off automatically, which is a really key point because what it means is these Bitcoin mining companies, they are non rival energy users because it's not when you have peak demand, what happens to wholesale electricity price goes up, right?
Cause that's the first mechanism to try and get people off the grid. You economically incentivize them to get off the grid because you spike the wholesale electricity price. Well, because your electricity price is the major expense of Bitcoin miners. That's going to throw them off before anyone else comes off because it's 60, 70 or more percent of their total operating expenses.
Someone who electricity is a relatively small amount, I'll stay on a little bit longer, but Bitcoin, they're off straight away. So they're a non rival user of electricity. It's a really important point. So a lot of the, the misinformation has been saying that they're taking resources. They're taking renewable.
No, they're not. They're doing the opposite. They have no economic incentive to compete whatsoever.
Kevin Whitmore: Just on that, Craig's just raised a point around the price signal is a potential problem when Bitcoin prices are high, energy only markets may not be able to compete.
So that's. Any comments on that.
Simon Collins: It's no, it's a, it's a very fair point because, you know, in, in late 2021, it was basically impossible to lose money mining Bitcoin, no matter where you were in the world, right? Hash price was very, very low, sorry was very, very high. And yeah, so you, you saw sort of super normal returns per hash. That's very different at the moment and has been very different for the last 18 months.
So, yeah, I think I think as as I think I was saying you would probably want in a very sophisticated system to build some other measures for demand management into your into your system. But, you know, we've got a great, we're building, we're building the case for this stuff as we go at the moment.
We're building the ship. We're sorry. We're building the plane as we fly it at the moment. So, you know. As Craig is saying right now, the deal structure is really important, you know, and, and PPA should be fair to all users of the grid, including miners and including downstream users.
Daniel Batten: Yeah, the, the, the good news there is that the, the volatility and wholesale electricity prices, it's way more volatile than Bitcoin.
And so that the major signal is the price of wholesale electricity rather than the price of Bitcoin. I think there was about, I did some analysis on it. There was about a two month period over the last four year cycle of Bitcoin, where Bitcoin price rather than wholesale electricity price was a major driver of miner behavior.
The rest of the time it's wholesale electricity price. This is just a really simple graphic. This is a TLDR version of showing why Bitcoin mining's really good. And yeah, then we'll get on to CH4, which we've already covered. So that's kind of an overview.
So in summary it's making those so Bitcoin mining is helping people to become more profitable by reducing curtailment. It's helping them become more reliable by reducing by increasing and giving another option for demand response, which the International Association of Energy has said will be the major way that we're going to reach carbon zero. And the 3rd point is that it makes them more fundable and it makes them more fundable because if you're a renewable operator right now, and you want to get onto the grid.
And your major problem is with those big queues to get onto the grid and maybe a small chance of getting funded, well, who's going to want to fund a venture, which is going to take 3. 7 years before it can actually get onto the grid and start selling. Any takers for that? Who wants to fund a venture, which has a 15% chance of getting a, yes, no one's going to want to fund that.
And that that's a big challenge, but if you have someone who can use that electricity before they get on the grid. Suddenly it changes the entire funding equation because now you go to your financial back and you say, yeah, it is going to take me 3. 7 years to get onto the grid, however I can start earning revenue the moment that I've laid my photovoltaic panels on the ground and I, because I have this Bitcoin miner and not only that, but I have a guaranteed price for electricity.
I have a fixed price contract over the next five years. It's going to give me this much money, which will give me the time that I need to stay profitable until I get onto the grid. That's a much more favorable financing proposition than no money for 3. 7 years and a 15% shot afterwards.
Kevin Whitmore: Awesome. Thank you for that. What I might just do now is we are at the 60 minute mark, so I'll give people an opportunity if you've got to head off et cetera, feel free to do so. What we're going to do next is just jump into briefly what, what Daniel's up to at the moment, and also what Simon's up to in terms of their current, current ongoings, and then we'll jump into a Q& A.
So yeah, if you need to head off, feel free, otherwise we will continue onwards. So, yeah, Daniel, do you want to give us a little bit of a insight into what you're doing now with your accelerator and CH4 capping?
Daniel Batten: Yes, so we, we started to talk a little bit about methane. Yeah, so really just springboards off the stuff I've been talking about already.
After looking at about 200 different climate tech propositions over a period of 5 years you kind of start to ask the question, You know, what's going to have the most impact you've only got so much money to invest. And so the question came to me, which is, can we have a measure where we're measuring the amount of emissions mitigated per dollar invested?
And the, some of the projects that we were putting money into, there was actually three problems. The first problem is that it was high tech ventures and like all high tech ventures, there's a high probability that they won't actually work or that they will work, but they won't scale. So that's a problem.
If you're investing in something that it might not actually be a solution. The second problem is that it was going to take, even if they were a solution, it was going to be a solution after 2030. And a lot of the work we need to do in climate change is pre 2030. Okay, so it was going to be high risk and it was going to be not that immediate.
And then there was a third challenge, which was that it was only addressing CO2 emissions, but it was doing nothing about our methane emissions. So I just started to ask the question. I thought, well, what if we do something about our methane emissions? What if we do something that's immediate doesn't have to wait till after 2030.
And what if we do something which is low risk, you know, using existing technology, not high risk stuff, stuff that exists today that can have an immediate impact. And that was the, the question that actually led me down this crazy rabbit hole to discover what was happening with our methane emissions, just how much of a focus the UN is giving it currently.
It led me to discover that landfills was on track to become a major emitter and then it got me to look at these different solutions and one by one by one, each of them got ruled out and so it's left with data centers and then you look at these different sorts of data centers and you've got HPC, you know, high performance computing and you've got you know, your Amazon that needs like 99. 99999% availability or that that's never going to take place on a landfill.
So you're down to high performance computing, artificial intelligence stuff for maybe seismic simulations or weather simulations and Bitcoin mining. And you look at the economics of each one. You look at what cost to invest to get the data center up and running.
You look at how much weatherizing it's going to need and you look at the return on investment. You go, that's the one that actually makes the economic sense. And that one was Bitcoin mining. So we came to this in a very, as I say, very dispassionate way. We were simply interested in answering the question, what's going, what's a fund we can set up that will maximize the emissions reduced per dollar invested.
And we ended up with this crazy answer that we didn't expect, which was called do Bitcoin mining on landfills using landfill gas that previously would have just been vented straight into the atmosphere. And stupid me, I didn't realize how complex it was going to be to actually do that. But it's crazy complex.
You've got to understand about infrastructure finance. You've got to understand about Bitcoin mining economics. You've got to understand about landfill gas power generation. You've got to understand about landfill gas carbon credits. And that was four things that I had very little understanding of 18 months ago.
I now have a little bit more understanding about. But I have people smarter than me in each of those areas who have a lot more smarts who have been doing it for longer than I have. So we built a team and the vision is to, we fund power generation projects using Bitcoin mining on four landfills, each of them about generating eight megawatts of power.
We're not in New Zealand actually, because in New Zealand, a lot of them, they can actually sell power back to the grid because New Zealand is a long skinny country and we have actually pretty good grid infrastructure compared to a lot of people in the world. So you can actually sell it to the grid in New Zealand, but most places in the world you can't.
You need a an on site user. So that's what we're doing. And we're currently, we're developing an accelerator program specifically for people who are crazy enough to want to enjoy the engineering challenge of turning humanity's trash into digital gold and mitigating serious amounts of CO2 equivalent emissions in the meantime.
Kevin Whitmore: Very cool. Very cool. Awesome, and Simon your Orange Pilling Parliament.
Simon Collins: Yeah, that's right. Yeah. Yeah. So sidling up to people like Dennis Porter around the world who have set both the bar and delivered us a really handy model to implement, which is to raise funds using geyser, which is a really great crowd Bitcoin only crowd sourcing platform, crowd funding platform and and we intend to buy 120 copies of the Bitcoin standard to distribute to the next government. Whoever that might be.
And so the timing to me works really well because we'll be just just before the next halving will be a good time to distribute these books. We'll have new ministers and shadow ministers with their feet under their desks and with the most time horizon ahead of them to read, digest, and implement if they so choose the learnings from from, from that book.
And also to drum up a huge amount of publicity for Bitcoin, New Zealand's Bitcoin community and to demonstrate that we're an organized community with a worldview and a worldview that kind of allows us to be predictive and, and to make kind of Predictions about how we see and expect the world to operate under different systems and mechanisms.
And so I think the timing will be really good for that. Right? So we should be seeing some good price appreciation and the number go up camp and hopefully Stackr and and and CH4 will be well established and down the road of their own projects, which will add some real, and Gridshare as well, some real credibility to the space in New Zealand as, as operators and Web3NZ as well.
Sorry, everybody's, everybody's invited. So I think it's really good timing, you know, to be having this conversation in New Zealand and with government. And so, yeah, we're actively seeking donations. It would be great if anybody, who hasn't yet donated sent us enough to buy a book, that would be hugely appreciated.
We only need 120 people to buy us a book, and then we're there.
Kevin Whitmore: Awesome, yeah, and if you want to drop the, the link into the chat as well, we can, we can share that.
Simon Collins: Yes, I will, I will do that, yeah. But also, it's just very easy to to Google Orange Pill, the New Zealand government at Geyser Fund.
Kevin Whitmore: Very good. I'm sure Rob and I've got a few Sats left on our lightning channel somewhere we can shovel them in.
All right. So what I might do now, I'm just going to share very quickly the The link to scan the code. I'll put the, the URL in the chat as well. But just be great if people could fill out the feedback form because it helps us orient for, for additional sessions if there's anything additional that you want to hear about on these topics or other topics.
One we've got coming up on, which I'm really keen for more in info, is we've got Lisa from Base 58 who's keen to do some talks around lightning education in New Zealand and the career potential career pathways for people both on from an open source development on Bitcoin and lightning, but also developing lightning integrations into enterprise solutions as well, which seems to be taking off. Those sorts of topics are available, but it really depends on what the community wants and where the interest lies, etcetera.
So, do feedback on those topics. I'm going to shut off the recording and we will jump into some Q and A.