Fred Thiel on The Future Convergence of Energy, Bitcoin Mining, & Industry | AIM Summit London 2024

Transcripts are autogenerated. May contain typos.

00:00

good morning so I'm almost the last thing between you and lunch never a good place to be even worse is between you and the bar um so today I'm going to talk about um a couple of things uh just by way of background Marathon operates really three distinct businesses one is utility scale mining that's what kind of the steamed panel before me was talking about operating large sites either directly connected to a power source behind the meter uh or sitting on the grid and taking power the other business

00:36

we run is one called Energy harvesting you notice it's doesn't say Bitcoin mining energy harvesting essentially is taking very stranded energy it could be things like methane gas it could be stranded Hydro assets solar assets wind assets that don't have a grid connection uh and even biomass generating electricity using that electricity to generate Heat I didn't say Bitcoin mining and take that heat and feed it back into an industrial process this is the solution to the problem of where do I get my power from

01:12

in the future it's you generate it yourself you become an energy company the third part of our business is technology we do everything from um investing in the development of as6 for Bitcoin mining to immersion Technologies to firmware for miners pool operating software Etc and a lot of that technology now is also becoming applicable to the AI industry so today I'm going to focus on energy harvesting and why I think that that is really the convergence where Bitcoin mining the energy industry and um really the

01:44

environment come to play together so Bitcoin miners have traditionally been focused on these large utility scale Sites Big Buildings um big sites uh Riot has built an amazing business with their sites in Rockdale and now their new site that they've just energized in Corsicana Texas you know talking in hundreds of megawatts or even gws of power as the panel before me mentioned this is going to be harder and harder and harder to find because the AI industry has a mandate to go out and build these large data centers for AI um what the panel

02:20

didn't mention was the fact that while uh it may cost upwards of a million dollar a megawatt to build a Bitcoin mining site it costs 12 to 20 million to build an AI Data Center and I'll give you an example Microsoft is building a data center um that consumes a few hundred megawatts $800 million for the building infrastructure $3.

02:45

2 billion for the compute power now the equivalent Bitcoin mine would cost $100 million to build so it's a very different business very different economics the hyperscalers are out there today cutting deals globally g42 just announced a deal in Kenya where up to a gigawatt of uh geothermal energy will be used for AI processing this is going on and that's a partnership with Microsoft this is going on on a global basis so Bitcoin miners are either going to be in the business of selling their sites to AI operators because of the power contracts because

03:23

the commonality of AI and Bitcoin mining ends at the power substation everything else of the infrastructure is different and so we believe that the future Bitcoin mining is in this convergence away from these utility scale sites and more towards energy uh harvesting so if you think about the energy transformation that's going on today governments are forcing this transition to electrification in the US uh they're moving towards electric vehicles the state of California has banned natural gas in new construction so you can't use

03:56

natural gas to heat your home you can't use natural gas to cook you can't use natural gas to heat water it has to be electric you have electric vehicles that's a lot of electricity generation that's needed there are some states in the in the US for example who have revised their power needs now think about this the electrical generation industry in the US over the past 20 years has grown demand seen demand grow by 2% annually so they haven't had to build out a lot of infrastructure they're now predicting 15

04:28

and 20% growth rat Ates in the demand on power because of AI and electrification and so states with regulated environments were before they opened their arms to bitcoin Miners and said hey please come in here help balance our grids are now saying wait a second there's too much demand we don't even have enough for our consumers and so this is causing a a big shift so the electrification is just exacerbating it the problem also is lack of transmission you can build all the solar Farms all the wind farms that you want

04:59

but if can't get that electricity to the consumer you can't get your site financed you can't get that solar farm financed and so somebody has to play a role of being this buyer of Last Resort of energy which is what Bitcoin miners do that can enable renewable energy sources to get financing get built so that in the 5 to 10e period it's going to take to build out the $3 trillion of transmission capacity that the US today needs and this is even before we start talking about Africa or we start talking

05:32

about Europe um somebody has to be that Basel load customer so that's one place where Bitcoin miners can play but you also look at the issues of needing to find ways to offset energy use by fossil fuels and other means using things like Bitcoin mining and that's what I want to share with you today so there are many stranded or underutilized energy assets out there landfill gas lots of methane is coming out or methane as they say here in the UK is coming out of the ground in these sites and Google is about to release a

06:09

new tool with Google Earth which will let you see where methane is coming out of the ground and where methane is escaping which is something the fossil fuel companies are really not very happy about so you have methane you also have biog gas there are huge amounts of agricultural waste byproducts of things like ethanol methanol manufacturing beer brewing Spirits distilling Dairy farming Etc that today not only generate methane but need to be mitigated and processed all of which can be used to generate electricity that is new additional

06:48

additive energy to the energy being generated by solar and wind farms as well as the grid if that energy can be consumed at the sight of industrial need then now now factories all of a sudden can be placed in places where they necessarily don't need grid connections but more importantly most factories also need something called heat and I'll talk about that in a second but so you have biog gas you have landfill gas you have flare gas in oil fields um that is essentially just being burnt to convert the methane into carbon dioxide that's

07:22

wasted energy and then you have other waste to energy assets like methanol ethanol production Etc and then you have these solar and wind farms that don't have grid connections or maybe they're mature assets or maybe they're hydroelectric dams that have operated for years they've been paid off and now there are wind and uh solar farms in addition on those grids and those hydroelectric dams can't sell energy so what do you do with those assets well you start to mine Bitcoin but you have to do it at small

07:54

scale so stranded energy can be used to mine Bitcoin we have the ability using uh our immersion technology and our miners to operate sites that essentially operate lights out at sub one megawatt capacity all the way up to 1 gaw capacity now think about that if you can operate sites where you have access to a few hundred kilowatts of power and you can do it profitably mining Bitcoin you can use energy nobody else can use you can also use energy that most probably you can acquire for one cent or less per kilowatt hour but you have to have the

08:33

technology to do that Additionally you can take waste energy generate electricity from it and then use that to operate your Bitcoin mine and eventually if transmission capabilities are brought near the site you can just sell the energy to the grid but meanwhile you can mine using that energy and as I think Adam mentioned in the prior panel as newer and newer generations of machines come online you take your newest machines put them uh in your high price power sites and then you deprecate your older machines to these sites well

09:06

if you have sites where your cost to generate electricity is zero because you're being paid to take biomass process it you can put old machines and run them all day long they only need to run four hours a day maybe it's a very different business so if we look at methane super emitters obviously wetlands are a huge one followed by agriculture energy industry is a big emitter then there's waste trash and other as well as biomass burning and when you look think about Bitcoin miners they are super efficient

09:37

heaters 95% of the energy that goes into them comes out as heat one single s19 which think of this as the what was state of the art three years ago can heat a home it's pretty amazing when you think this thing draws most probably about 3 KW so we can take a Micro Data Center generate heat our immersion technology will capture water essentially at 50° Centigrade it's a closed loop process so we don't actually consume water it's just a closed loop you can use that for shrimp farming you can use that for heating buildings you

10:13

can use it for heating hot houses and you can use it for preheating industrial processes and why is preheating industrial processes important well 50% of the world's total energy consumption is used for heating things and of that a certain percentage is used for what's called low-grade industrial heat heating buildings heating homes the preheating materials that go into food processing preheating materials that go into beer brewing Spirits distilling ethanol manufacturing Etc or drying wood and if you look at that energy

10:47

that's used for heating 66% of it comes from fossil fuels and it goes to things like boilers electric heating and biomass so if you could take 10 to 15% of that energy and use Bitcoin miners to generate it you do two things one you've mitigated your cost of energy and B you've eliminated a need for that energy to be sourced from the Grid or other places so we believe that supplementing traditional heating using the heat generated from Bitcoin mining makes all sorts of sense not just Financial sense

11:23

but it also makes ecologic sense and environmental sense instead of using electricity to drive heaters heat pumps to generate heat we can use electricity to mine Bitcoin generate heat and now you have a byproduct from your heat generation and it's called Bitcoin and it happens just to be a waste product from your process so heat could be repurposed on an exponential scale meaning as small as a little space heater on a table that consists of a couple of chips from prior used Bitcoin miners all the way up to

11:54

Citys scale steam heating we've just kicked off a pilot in Finland for example where we're heating buildings with Bitcoin miners so you notice a lot of this is not about Bitcoin mining it's about more environmentally friendly energy use and it's about recycling heat Bitcoin mining is simply how we generate the heat so we believe that nearly all devices that consume or store energy are viable Bitcoin miners every single Tesla power wall every EV out there could do Arbitrage with its excess energy and

12:26

mine Bitcoin in small amounts that is the long tail of Bitcoin mining right now we're sitting at that left side of the chart where it's all utility scale but it's all going to move Downstream because it's getting harder and harder to find those big power sources those big amounts of available power so we believe that there's an opportunity in the future where technology will include Bitcoin mining capability in any type of battery storage system any type of large consumer heating system where it can do

12:58

Arbitrage on energy

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