Energy 101: We Ask The Dumb Questions So You Don't Have To

0:00 Hey guys, welcome back to another episode of Energy 101. You've got Sydney and Julie and a very special guest for a special episode. Today's a little different with the news that has come out

0:11 recently with ERCOT and the grid, a little bit of Bitcoin mining mixed in. We thought it would be fun to do a little special episode with our friend, Marshall long. Yeah, yeah. Thanks for having

0:21 me. Appreciate you joining us. So give us the rundown on what's been all over Twitter. All right Uh, the grid is going down. It's, uh, now it's, you know, it's, it's been interesting because

0:34 it's just so hot this summer across Texas at large. And, um, there's a ton of renewables on the grid right now. And so interesting things happen when the sun stops shining and the wind stops

0:45 blowing all at the same time. Sure does. And when it's, you know, 140 degrees outside and everybody comes home at the same time, turns on their AC. And also at the same time, the sun stops

0:56 shining and the wind stops blowing Yeah, things go crazy. Yeah, so there's been a ton of headlines and a lot of people are angry, mostly a Bitcoin miners. Yeah, they got paid so much. Yeah,

1:10 sure. But can you kind of explain? You went on this long, let's call it a tweet storm. It wasn't really a tweet storm, but it was a very informative thread. And we can, can we link it? Yeah,

1:21 we're going to link it. We're going to actually put the pictures in the episode. So as we're talking, it's going to come up. But yeah, talk us through that, because I think, I don't think we've

1:31 ever talked about the grid. We haven't. And Texas is very different than the rest of the US. and wherever else, um, and how our grid works and all of that. So, so we'll just start, I guess,

1:44 from the top. Our grid is just our grid. That's right. So in general, the way any gridworks is you link the generators to the end users, right? And so the best way to do that and most efficient

1:57 way to do that, those are all kinds of things that we'll be talking about. That's how any grid works. Now, what makes Texas unique, and there are some others as well, is it's deregulated,

2:07 meaning that there's a real market for supply and demand. So you can see a real-time market price. You have multiple retail electric providers bidding on customers. You have different generation

2:20 assets, and they're all privately owned. And the market is also privately owned So ERCOT, while highly regulated by the Public Utility Commission, is still a private company. So that's very

2:33 unique. There are some other ones, like PJM is another one, and there are some others, but there are unique challenges to Texas. So it's not all of Texas, like El Paso is not in ERCOT. Oh, I

2:47 didn't know either. So

2:49 you can just think of most of Texas being in ERCOT So when they say it's disconnected, the amount of what we call tie flows. allows us to like import power, export power is very limited in Texas.

3:03 So we're kind of like on an island. And ERCOT is split into a few groups. We call them load zones. So like Dallas is technically part of the same grid as Houston, but Dallas is in low zone north

3:16 and Houston is its own thing. And we have low zone south and east and west and they're all connected, but they're individual markets. So

3:27 yeah, Texas is its own kind of animal So I think it's going to be in the markets in a sense of what? Right. So if I go and I buy power, right? My power price is going to be if I'm in Dallas, the

3:39 real-time market price for power in Dallas is going to be different every five minutes from it is in Houston. It's pretty close, but it's technically a separate market. Right. So I think of

3:49 whenever we had Gritty, oh my God, Gritty is such a great example. What is that? It sounds pretty up until, you know, but. Well, let me preface this as we understood the risk. Yeah, sure,

4:01 sure. Most people did not understand the risk. They thought they were just getting great prices. Gritty was a provider, electricity provider, that gave you like access to wholesale pricing. So

4:14 we as end users got wholesale pricing whereas usually wholesale pricing is what, you know, the company like TXU Energy has and then you get, then they give you the end users of the price Right,

4:28 and they, yeah, like TXU will then kind of - So we can just start there, it's a great place to start. So when you buy power in Texas, you can only buy it from what we call a retail electric

4:40 provider. So you can think of like a TXU or a Shell Energy or NG, you know, whoever it could be, like a tri-eagle, that's a popular one of Houston,

4:50 those people are allowed to sell you power. And the way they generally do it is they go to the wholesale market, they go to Urkot directly, and they buy a chunk of power for, call it five years,

5:00 right? So they'll go and they'll buy a chunk of power for five years and then they'll mark that up and give you pricing, flat pricing for five years. So they get a locked in price that's lower.

5:11 That's right. So they can mark it. So the wholesale market is great. However, what Gritty did was they allowed customers, they basically passed through the cost to customers. And in Urcott in

5:21 general, the cost is cheaper, but the cost is also volatile, right? So the price kind of goes up and down and up and down. And in general, it's pretty low.

5:33 I would say really low. And there were times where we would have negative prices, which we didn't get paid for, but we didn't have to pay. Right, so that was their business model, right? As

5:43 they eat the negative pricing, they get that upside and they're passing through the real-time market for you. And in general, in the middle of the day, when it's higher, you're not home anyway,

5:54 you're not using power so like Gritty's business model was. will basically pass through the real-time market, which is a really cool, really cool thing, until a winter storm, Yuri comes. Fixes

6:05 for ease. So here's an order, so that's called trading index, okay? That's what we call trading index, where you're on the real-time market and you're buying real-time. So it is a real-time

6:17 market place, you can go to ERCOT's website, you can see the real-time market price.

6:22 In order to do that, you have to post collateral with ERCOT So Gritty puts up collateral with ERCOT, and that allows them with their rep license to do those kind of trades. Now the problem is,

6:34 when price is explode, from, you know, you're normally playing three cents, and then when Yuri comes, you're actually paying 10

6:42 per kilowatt hour, which is insane. Got it, really, yeah. People like can't pay that, right? Like you're paying 1, 000 a day for your power, 2, 000, 5, 000. So nice And if your customers

6:54 can't pay, or you as a retail lecturer, Friday, can also not pay ERCOT and ERCOT does what's called a margin call. And they take all the collateral that they had with ERCOT and they get wiped out.

7:05 They're bankrupt, they're toast, which means they're customers. Then did you guys change to somebody else? How did that? Yeah, so whenever it started happening, we were watching things and we

7:17 were like, Okay, we've got it through something like a grid. I can't pay my power bill. Yeah, Gritty's just like sending out emails, like find a new provider, find a new provider This is not

7:26 good, grab a blanket, find a new provider. So at that time, other providers, you couldn't get in. Like they were so overwhelmed with trying to figure out what to do for themselves, I think.

7:39 That's right. That it was really hard to find once. We eventually found one and we switched, so we were kind of hedged from that for the most part. I mean, it still got up to, I don't even know

7:50 if we paid, I doubt we paid, but it got up pretty high It's crazy.

7:57 And you're just watching the app real time and you're like, turn everything up. Throw the breakers out of

8:04 the house. Not that even like we didn't even have electricity at this time. Or I guess it started for the storm. That's right. Yeah. So the prices started to explode. I think Friday night or

8:12 Saturday and then the storm was like Sunday night. Yeah. So for the most part, like if you didn't switch your electricity was out anyway. Yeah. But yeah, some bills were insane Yeah, so

8:24 that's the double, it's sort of a real-time market, right? So most large suppliers, they don't do that because it's a risk mitigation strategy, right? So in

8:36 ERCOT, there are a few key players that we'll call. So you got the retail electric providers. You've got brokers who help people shop, right? So you can go to like thepowertochoosecom or like

8:49 scan in quotecom Those are all good examples, you can like upload your power bill, like on scan in quotecom upload your power bill and they'll do the shopping. you between all the reps and they

8:60 have deals with the reps where they'll mark up the power slightly and but they get you a good price right because everybody has different prices and it's illegal for reps to call each other and say

9:10 hey what's your price today what's your price today so it's the brokers are kind of in there they make a little bit of a spread they mark your power up but you get a pretty competitive price those are

9:21 like the main two entities now as far as the more nuanced things like the demand response and all these winter storms that we'll get into there's what's called a qse call it a queasy I think it stands

9:33 for qualified scheduling entity

9:36 and that's kind of like the third leg that's more of the bespoke things so in general those are the main three types of people that are dealing with the power mark and there's all kinds of other

9:47 things like traders and you know all those other things but as far as you're at home you pay a a power bill, you're paying your power bill to a rep. Now who found you that deal that's probably a

9:57 broker, like Savant Energy or a ton of these other brokers out there. And then

10:05 for other things, Tesla has a new thing right now. If you have power walls or solar panels, they'll help you sell to the real-time market. Oh, cool. So Tesla is a rep when they sell you the

10:16 power, but when they're trading the power for you, they're a QSE. Okay. So most of these large reps are also a QSE. So that's kind of where this whole thing gets involved because, you know,

10:27 you've got people saying, Oh, ERCOT paid Bitcoin miners 30 million on the back of the taxpayers, and that's not actually the whole truth. Yeah. So. Yeah, let's dive into that. And I'm gonna

10:41 say this from someone who is, I would, I'm not super uneducated, but I'm not knowledgeable either. Like it's like, I could go either way. So looking at Twitter and seeing, you know, the

10:53 outrage and people are.

10:56 basically saying like why are Bitcoin miners even on in the first place? Like they're wasting energy, whatever. I can see a stance for that. And if I weren't like for freedom,

11:12 I could see how that would be confusing. Sure, sure. So like just general occupation, yeah. Like how would be confusing? Like why are they getting paid to not use? It's just confusing And I

11:26 wanna like clear it up because there is a lot more education that goes into that, yeah. So in general, the fact that you come home and you turn on a light and it works is a miracle of modern

11:40 science. The grid is a crazy thing. So let me kind of break things down first and then we'll get into why Bitcoin miners are important. And not just Bitcoin miners, but large flexible loads. Okay,

11:51 so when you turn on your light, And it works. It's because the grid is operating smoothly. The question is, well, how does the grid operate smoothly? When the generators and the consumers are in

12:06 unison, things work great. So here's what happens. When a gas turbine turns on, if there's no load on that turbine, it will spin much faster than it should. Now, when a turbine spins too fast,

12:21 you've all heard of a frequency, right? We know that in the States, we use 60 Hertz. So when you look on like the back of a iPhone charger, it'll say 50 to 60 Hertz, it's because 50 Hertz is in

12:31 Canada. Yeah. In other places, but in the States, we use 60 Hertz. That means the turbine itself, across the grids, all the turbines are spinning. They like to spin at 60 Hertz. But when you

12:43 put a load on that turbine, it will slow down. When you pull a load off that turbine, it will speed up. And what do you mean by load? So when you and everybody comes home. and they turn on their

12:54 lights at the same time, that's pulling a load. So when you pull more electricity on a turbine, on a gen set of some kind, it will make it spin slower. That's just a property of the physical

13:05 reality. So if you just think that there's a turbine linked to your house light switch, when you flip on the switch, it spins slower. And turn it off, it spins faster. And so that's a bit of an

13:16 oversimplification but for the official role though. And so when it spins slower, it's no longer producing energy at 60 Hertz So if you look at one of these slides here, this shows you on a normal

13:27 day, the frequency of the grid. So you can see it's not a flat line. It balances between 60025 Hertz and 59975

13:36 Hertz. This is a normal day, everything's going well, but it's not a straight line. Now, the reason that it's not a straight line is because nobody's using the same amount of power and nobody's

13:48 using one turbine, right? It's not one turbine that powers the entire grid. So this is all the generators communicating, and this is all the flexible loads communicating. So the fact that it's

13:59 pretty range bound quite tightly is a good thing. And above that, you can see why it's range bound so quickly. So these are the things that we call ancillary services. So these are all the

14:12 generators and all the, all the generators, natural gas, wind, solar, batteries, and all the consumers who are enrolled in ancillary services working together nicely. So this is, it seems kind

14:26 of like a chaotic graph, but it's actually the way things are supposed to work. Now when things dip below certain thresholds, these ancillary services will be triggered. So you can see the reg up

14:38 chart and the reg down chart. Those are the most,

14:43 I would say used ancillary services. What is the reg up and down? Ancillary services, there's a few buckets, okay? Reg up and Reg down are mostly used by generators communicating between

14:56 themselves. So if a bunch of people come home at one time or one generator has a big problem, like say the nuclear power plant, Comanche Peak. I'd say they, I think maybe two or three years ago

15:08 they had a fire on one of their transformers and just like that, 13 gigawatts fell off the grid, right? So all the other turbines started having problems and so they communicate and some will spin

15:20 faster and some will spin slower and maybe some windmills will get cut off or breaks will be pulled off some so they can generate more. All those lines, those purple lines kind of show you how those

15:31 assets are communicating collectively. So it's all kind of a formula to depending on what needs to happen, they all work together to find just the best formula. If you want to generate on ERCOT,

15:42 you can't just like connect to the grid. You talk to ERCOT and most of these power plants, these huge power plants, There's like five people that work. They're highly automated, highly

15:52 orchestrated, very unified across their cut telemetry. So they all kind of talk. And that's what kind of keeps the grid in those bounds. Now what happens when they get out of bounds? The other

16:05 ancillary services can get dispatched. So if you go to the next one, here's a good example. You see how the frequency dipped. This was from last week,

16:16 that big dip down to 598 That's a big red flag. Now you

16:23 see how the rest of the charts are way more, the purple lines are way more different.

16:31 When the grid goes that low, it's danger time. So if you want to go to the first picture, we'll look at what happened during the winter storm period. So this explains what happened, and this is a

16:43 chart of frequency. So a lot of people want to talk about how much power the grid uses and how much power the grid has available. but that's not really the most important part. Most important part

16:54 is frequency to make sure everything is kind of in lockstep. So look at the frequency, like nose dive to like 40 Hertz, all your electronics in your house are getting fried. Oh, yikes. Yeah.

17:06 Fried? Fried. And the breakers aren't gonna trip in your house. So like frequency is the most important part. Some people say it's

17:16 like the blood of the grid The grid is like the veins, the amount of blood you have is like the capacity, but the actual movement of the blood within your body is super important. You can get, you

17:29 can bleed out a little bit and you're fine, but if your blood stops moving at the right pace, you've got big problems. Yeah. So this is kind of similar. So for the winter storm, you can see how

17:41 this is kind of, it starts off as like a, not a crazy slope and then it knows dives So what happens is, when, Winter storms happen, right? And the turbines weren't winterized. I know

17:53 everybody's heard, No, the winterization, blah, blah, blah. When things freeze and the turbines stop spinning, what happens is other turbines stop spinning because those turbines stop. And

18:05 then it's kind of like a falling knife that you have to catch. And so when all the turbines start tripping each other off because this one froze, okay? And now this turbine has more load on it

18:16 because it's taking more loads, it takes more from the rest of them, it spins slower. And then because it's spinning slower, the frequency keeps going down. And then the next turbine is slower

18:27 because it's having to soak more load. And so you can see how it just kind of progressively knows dives. And so

18:37 you've got, at the first point, you've got 14 gigawatt of outages And then you can see another 250 and another 330.

18:48 grid has to do is they have to shed the load. So when a turban falls offline, the other turban spins slower because they're having to eat more of the consumption, which makes that spin slower,

19:01 which trips others offline and so on and so forth. So you've got to have these rolling blackouts to pull the load off. And so if you can't get in front of it, you can see how it goes down. The

19:13 winter storm went down very low, 593,

19:18 which sounds like nothing. Not that much. Yeah. But big problems can happen if, you know, you don't want to hurt people, number one, you can have very serious electrical equipment failures.

19:30 And so they open the relays to disconnect people. Yeah. And so you can see the little sag there, the red line is we were, I think when the grid gets to 5925,

19:45 the whole thing just shuts And so that would be called a total grid blackout what would have happened like how long does it take to come back on? Sure, so there are Protocols So

19:58 if everything goes offline like hospitals and right oh, yeah, because they kept the hospitals on So they kept the hospitals on there's also certain non-interruptible loads like there's a lot of Like

20:10 refineries that have catalysts they have to keep hot. Yeah, because it would cost billions of dollars if their whole pipeline gets backed up Yeah, and that can be bigger problems so

20:21 But let's say we did have a full grid blackout Hospitals are off police stations are off fire departments are off. You can't use your phone cell phone. It honestly sounds like the purge It is the

20:33 perfect If you have a grid blackout for real for real and it's super cold Like beyond just people in their houses. You've got people in hospitals on like the fibrillators and like all that's gone,

20:44 right? So they're There are procedures in place to do what's called a black start. That's where you have to open everything up and you basically say, okay, generator one, turn on. And then we

20:59 light up this section of the grid. Okay, they're good. Now we go to the next one and the next one and the next one. So it's, I think

21:07 the current protocol is four hours. If everything goes perfectly, generally that doesn't happen. We haven't had a black start in a very long time, but it could be like four hours to like a week of

21:21 just like issues. So you can think of frequency getting away from you, like a ripple effect, you drop a big stone in a pond and it just propagates throughout the whole grid. So that's why this is

21:35 an exact chart of what happened for Yuri and as things start coming back up, there's even more problems. So anyway, this is why frequency is super important So in the summer. when things get,

21:48 people are using more power. There's gonna be issues like this. So this is from

21:55 September 7th.

21:57 You can see where, so this is a chart from Urkot, and the blue line is the projected use. The blue dotted line is the projected use of the grid, and the purple line is the projected capacity of

22:12 the grid. Oh, good. So when the blue line goes over the purple line, not great So are these charts, not that the normal human could read them and like know what you're looking at, but can anyone

22:23 go on Urcot's website and like find these? That's right. These are all publicly available, you can go to Urcotcom,

22:30 and they've got one called Grid Dashboard, just click that, that's where you're gonna find these charts. There's links to it as well in this tweet. So we had some issues. That's right. And so

22:40 this was, I took the screenshot at,

22:45 around 9 o'clock in the morning, but ERCOT has a forecast for the day. So they know that things are going to be tight. And so this is where the flexible loads on the other side come into play. So

22:57 they're going to tell all the generators, Hey, you guys need to be running full bore. Please don't try to do maintenance today. You need to be running balls out. And then they put the loads on

23:08 notice. If you're registered in the Anselaire services programs, you're probably going to get dispatched today. Now, that means ERCOT is going to call you and they're going to tell you, We need

23:18 you to turn off. Now, if you're enrolled in these programs, you get paid if you get turned off. The way these programs work is, if you're a large flexible load and you are enrolled in Anselaire

23:29 services. What are some examples of who would be

23:34 a large flexible load? There's tiers of large flexible loads. Like an aluminum smelter plant. They can turn off, they're a big load, but they might need like two hours to turn off. Okay, so

23:44 they could be uh, ancillary services, um, the, um, another example will be like a Bitcoin mine, right? They can turn off much quicker and they're usually much larger, um, a battery, like a

23:58 industrial size battery would be one, a big warehouse could be one, but they're all on this kind of like stacked order. All right. So if you tell Urkot, Hey, we use a lot of power and we'd love

24:09 to enroll in ancillary services, they'll say, great, how quickly can you turn off and how quickly can you turn on? So for like an aluminum smelter, they'll say we can turn off in two hours and

24:20 it's going to take us two hours to come back up and say, okay, cool, we're going to put you in what we call ERS emergency response services. So that's generally the lowest here. They give them,

24:32 I think, 30 minutes to turn off. And when you turn back on, isn't that important? So that's like bottom of the barrel If you're enrolled in ancillary services or demand response, that's like

24:45 bottom of the barrel, if you can turn off your whole load in 30 minutes, cool, we'll pay you. I'm not gonna pay you a lot. And you can tell us when you think it's okay to turn off as far as

24:55 market pricing goes. Though the ancillary services also have their own prices. So I tell Ercot, I'm gonna run until your ancillary service is gonna pay me X amount. Oh. So it's not, you just

25:09 tell me when to turn off. I'll tell you, if you're gonna pay me X amount, I'll turn off. Well, that makes sense, 'cause I feel like, especially for some commercial industrial people, it's -

25:18 They've got real opportunity cost. Right, and so it's not worth it for them, and so that payment gets to a certain level. That's right, that's right. Can consumers, just like myself or Julie,

25:26 be a part of that? There are things

25:31 you have to do, so there's capacity limits that you would need to, they don't just let, you know, 50 kilowatts of a house be on this program. I think the minimum is one megawatt. I'm sure. But

25:42 there's a lot of warehouses and shops and heavy machinery people that they do this. Well, 'cause they figured most households aren't gonna move the needle. That's right, that's right. At all,

25:52 yeah. So that's like the bottom tier demand response. Now above that, you've got things called non-spin, which is another, you have 30 minutes to turn off, but you have to come back on in 30

26:05 minutes as well. And there's another one called ECRS, which is five minutes. You have to turn off with them five minutes and come back on in five minutes. And those are all great, but a turbine

26:14 reacts within milliseconds, right? So there's a top tier called CLR that in order to qualify for CLR, you have to be able to respond to an ERCOT request within four seconds. Who does the company

26:31 just give ERCOT like an emergency line? Like they literally just pick up the phone and call four seconds as fast to react. Yeah, and they call Tim at - So this is where the, this is where the

26:43 queasies, the QSEs come into play. So the queasy Urcot is not telling me at my warehouse, hey, you've been dispatched for ERS, turn off in 30 minutes, please. It's Urcot telling my queasy

26:57 through an API. Okay. And then the queasy has an automated email text and phone. Got it. An example of a queasy would be like voltage power, right? So they have an automated dispatch, they'll

27:08 call you, and it's like an automated teleprompter, like, hey, you've been dispatched for ERS, turn off. So

27:17 that's all done through the queasies. The higher tier stuff is a little bit more connected. So most large consumers have what's called telemetry. It's analog data communication with ERCOT. So

27:32 ERCOT can see my load in real time, and I can respond to their request in real time through my queasy. Got it.

27:40 It's all automated through API's and telemetry calls, but I tell Urkot every. One minute I'm using this much power. Let me know if you need me. Um, now for the four seconds CLR stuff, that's all

27:56 Urkot will basically give me a graph. And they'll say, here's a slope you need to follow. And I'm going to update this slope every four seconds and you have to be on that line. So they'll tell me

28:06 how I ramp and how I ramp up and down and up and down It's not just all or nothing. Why is it important to ramp up and down and not just like turn off? Because if I can stay in lockstep with the

28:19 generators going up and down, I want to be polar opposite with the generators. So if they're spinning too fast, I want to use more power. They're spinning too slow. I want to use less power. And

28:29 so if I can do that, I can help the generators stay in that 60 Hertz sweet spot. That's why it's so important. The 60 Hertz. That's right. Keeping ICIC Okay.

28:40 here demand response insular services, the CLR stuff. Now beyond that, there's a new program called FFR, which you have to respond within 250 milliseconds. And that's mostly just batteries. Okay.

28:52 So the batteries will tell batteries, Hey, we need you to eat more or discharge more. So that's kind of automated, right? Like mostly sometimes you have problems. No, it's it's all software

29:04 based. Got it. Okay. And there's, but there is a three strike rule kind of a haircut. If you if they call you and they tell you to turn off and you don't turn off. Three strikes, you are banned

29:14 for life. You cannot participate. And I'm sure they give you like heads up. So you're watching it. Well, in order to be in the top tier programs, you have to test. They test you. So they'll

29:24 say, okay, your load test for this program is going to be this day next week. And it's going to be between these hours. And if you fail that test, you cannot be enrolled in that program Wow. So

29:36 those high tier programs, they pay more and they pay more All right, so ERS, I think it's been dispatched like three times this year. September 7th is a good example of that, or maybe the sixth,

29:49 I'm not sure. But CLR, I mean, we get dispatched multiple times a day. So to put it in perspective, why Bitcoin miners specifically are well-suited, the CLR programs been in ERCOT as like a

30:02 published program for, I think, eight years. Nobody's been able to pass a qualification test, except for the past like four years Oh, wow, interesting. So ERCOT's very good at like making these

30:14 buckets. Like, hey, we have a need. You could fill this need if you can match these criteria in this test. And that test has been out there for almost a decade. So they had no one for like three

30:23 years. No body because no load can respond as quickly as a Bitcoin mine. So a Bitcoin mine is a big user, but it's also a granular user. So you might use 100 megawatts, but those 100 megawatts

30:37 are broken into chunks of 3, 000 watts. So three kilowatts here, three kilowatts here, three kilowatts here. And most Bitcoin miners can control their miners independently of each other. And so

30:48 if Orkot says, Hey, we need you to use 9991 megawatts, cool, we can do it. They're like, Well, no problem. Yeah, just turn off 10 machines, good to go. So this happened and the outrage came

30:58 because people found out. Sure, so. That's how Bitcoin miners were getting paid. So there's two sides to this like getting paid story. If you look at your power bill, there's a bunch of line

31:07 items on there. There's like nuclear decommissioning, there's, you know, ancillary service providing, there's all kinds of little small line items that if you look at your actual power bill in

31:17 great detail, they're all there. And those are things you pay for so that when you turn on the light, they come on. So because Comanche Peak has two dispos of spent fuel rods, you gotta pay a

31:28 little bit for that. But you want Comanche Peak online 'cause it's a stable, sustainable provider of power, right? And just for the ancillary as well, You have to pay for ancillary services. So

31:40 when the frequency drops, you can still blast your AC at 60 degrees. Right. Those are all part of the ancillary things and ERCOT takes that payment from you. Well, your rep takes that payment

31:50 from you. They send that to ERCOT and ERCOT pays the people who helped make sure you could turn on your ACU and you wanted to. And enter it, yeah. Yeah, so, and at certain months, those

31:60 ancillaries are higher and certain months, they're zero. So like in the fall, if you look at your bill compared to the summer, your ancillary charges will be much less. Yeah Much less,

32:10 your rep kind of normalizes that for you, but depending on what your power contract is, you will see those line out. Right. I wanna pull up my bill now. I know, now I wanna know. My bill's been

32:20 very high, so I don't know. Lucas likes to leave the freaking door open for the dogs and I'm like, the air is on, the door is open, we can't turn the air off because it's gonna be 80 degrees.

32:32 That's right, and those ancillary charges ensure that your AC stays on. So that's, that's the first way is single-handed. We appreciate them. We appreciate them. I'm sure we do.

32:43 The, so that's, that's one side is people get paid for ancillary services and what they contributed to help the grid. Now the bigger chunk of that pie is selling the power back to the grid. So as

32:53 a large user, I'm not buying power the way households buy power. I buy a power the more, more similar to the way a rep would buy power. I go to the market with the help of a rep and I buy a prepay

33:05 for a chunk of power It's a little bit more nuanced than that. It's technically like a futures market, but just suffice to say, I'm buying a chunk of power and I'm prepaying for five, 10, 20

33:14 years. And because I, that's right. Because I pre bought that power, I locked in my price. Right. Now in the fall, the price might be less, but in the summer, I'm not paying 5, 000 a

33:25 megawatt hour. Right. But because I prepaid for that, I own it. Now when the price of power explodes past what I paid for it plus what I'm making with it. I can choose to sell that power back to

33:36 the real-time market. Now that's not, I can make money by selling the power and not using it. Now that has nothing to do with ancillary services. Is that like, that's just like extra power. Yes,

33:47 so I have a long-term hedge PPA. And the price of power explodes. So there's a price chart on one of these. This is so interesting. Like I feel like I never would have thought like, it makes

33:59 sense when you think about it, but there's a lot that goes into power. Keep going down So you can see right now the real-time price of power, if you hover over that spike.

34:12 It's 80, I think it's 80. That's like right now right now. Yeah, that's right now right now. So 64. Let's say I bought power for five years and I paid 20. And let's say whatever I'm doing, if

34:24 I'm a refinery and I'm making 50 equivalent doing my business, Maybe you'd want to turn off. and sell your power back because you're actually making more selling the power than you are using it.

34:37 Now, the other side of that, it's a real-time market. That's not Urkot paying me. There's a counterparty that bought, so if I place that cell on the market to sell my power, there's a

34:47 counterparty who's going to buy it because it's an actual futures contract. There's somebody who's always long power and somebody who's always short power. So when prices explode to 5, 000, I can

34:59 sell my power at that price And there's somebody who's going to buy it at that price. That's not ERCOT and taxpayers paying that to me. So to put it in perspective, I think Riot, they do a great

35:12 job of doing demand response. And there was kind of a hit piece put up by CNBC. It's like, oh, ERCOT and taxpayers paid ERCOT 31 million, which is not true. That's it. Again, there's two

35:23 chunks. There's ancillary services, which is what taxpayers take the burden on so that the grid works, And there's selling power. I think. ERCOT only paid them about seven million. The rest of

35:34 that was them opportunistically selling their power to the market. And that's usually like a bank or a generator or somebody that's net short power, it has to buy that. And so if you have a PPA,

35:47 you're a long power. So that's just kind of how it works. So really, most of the money being made by miners is us just selling our PPA's back to the market. Ansellaries is super necessary for

35:59 reasons we said, but it usually makes up only revenue for us in the summer or in the winter when things are not crazy. So how much did Riot actually make from Ansellary services? I think they

36:11 published just about seven million. Okay, so that was not the - Seven of 32 million. The 32 million. Yeah, the remainder, the net of that was them just selling power in the real-time market.

36:21 Okay. Yeah. Which does not come from taxpayers. That's what I find so frustrating. It's just all of these, what, it's just, Are they uninformed or is it not? do they just want to? It's the

36:33 reality is the grid is an insanely complex thing. And you know, I'm not an expert by any means and there are so many more niche places just like oil and gas stuff, right? Like I kind of know how

36:45 oil comes out of the ground, but like just like six months ago, I know what the word bitumen is. I didn't even know what that word was. I don't know what that means. Yeah, apparently it's like

36:54 when oil comes out of the ground, it's not like black oil, it's like a mix of crap Yeah, I didn't know that. They probably use certain chemicals from our friend or chemical fund, yeah, Kai.

37:07 There you go. So again, I also have no idea about that. So the grid is incredibly complicated and it's always changing. There's new programs coming out by ERCOT and there's new regulations and

37:17 this and that and the third. So it's always changing. But I don't think in general it's

37:25 a mistake that they try to paint people of large users is like bad. For sure. So also put a tweet up about why it's important to have large flexible loads. Yeah, so that right there is a good one

37:37 to kind of highlight. That's something that this guy Pierre from Riot put out. That talks a lot about more in detail about Enzler Services. You guys should probably link this one here. Yeah. It's

37:48 a good job of like breaking that one down. That chart is a good kind of indicator of when things, you can kind of tell when things are gonna go haywire So this is a chart of wind and solar on ERCOT.

38:00 And as you can see on this day, they both dropped off at the same time. And so when generation drops off, but consumption stays constant or goes up, you're gonna have frequency problems. And it's

38:12 just hard to tell when the wind's gonna blow and when the sun's gonna go off exactly, right? So this is why Texas has to have a robust Ancillary Services program because we do have so much

38:23 renewables on the grid. I'm laughing at your, the caption Our mom gets to live another day. That's right. Yeah, I put a, and actually this day was good because the wind actually kicked up when

38:37 it was projected to not kick up. And so Urkot did not crap the bed this day. So anyway, that's a good overview, I think, and let's blow holes in it. Yeah, no, I mostly want to kind of combat

38:52 like people on Twitter who say Urkot should be spending that seven million that they use and it sounds stupid now that I know all the information behind it, but they should be working on, what do

39:07 they say, new

39:10 equipment or new ways to generate power rather than paying people? So again, keep in mind that Urkot is a private company. All the generators are private companies. They can do whatever they want.

39:23 And the people who buy power are all doing it at will. Now, what does that mean for the consumer? That means that your power price is cheap, right? So right now, maybe you pay 11 cents per

39:35 kilowatt hour, 12 cents, something like that. And I lived in Boston, I was paying 30 cents. Oh my gosh. And it's not because there's not enough power, it's just because it's all done by one

39:45 company and there's no competition. So you gotta pay a little bit. Capitalism for the wind. Yeah. You gotta pay a little bit in fees to make sure the capitalism is allowed to do its thing. But

39:55 you at the end of the day, reap the benefit of having lower prices. Yeah. Now, 1112 cents right now is crazy high to me. Yeah. It was five, six cents, but with all the storms and all the

40:07 ancillary stuff's getting dispatched, it's gone out. But it's still not 30, 40 cents that you're gonna pay in New England, New York. You know, all these kinds of regulated markets. I guess

40:18 that's my next question is the regulated market. So you have one person, it's more of like a government oversight rather so they can charge what they want. And it's wild to me that that doesn't get

40:31 more talked about and people always talk about how

40:36 The winter storm how they like blame it on the oil companies or like whatever just like yeah Manipulating the market and all of that and I actually saw something in the Houston Chronicle of all places

40:50 About this where they're like blaming

40:54 I don't know if it was oil companies or whatever pipeline something they're blaming the freeze on that and it's It makes me sad that people like don't care to educate themselves. They just believe

41:08 that like go after these Arrested it's just easier. Yeah, so there are in these

41:15 regulated markets. There is oversight They're not gonna like be allowed to just completely gouge you cuz I'm a federal government get involved But they are allowed to kind of warrant their prices for

41:26 things that they see fit to do right? So for instance, they might want to overwinterize, right? They're going to pass that cost along to you because it's all the generation in most of these places

41:37 is one company, right? So like Duke Energy, for example, they run a good portion of the grid around like Ohio and some of those places.

41:46 They want to overwinterize their stuff good or bad. However you see it, doesn't matter. You got to pay for it, but you didn't get to say, yes, I opt in for that or not in Texas because there's

41:57 multiple generation companies. Some might winterize differently or at different times. And so you also don't get to choose that, but it's not an all or nothing situation. So do you have

42:12 the fees that you're paying for ancillary services? I think the way you put it's pretty good. It's like an insurance policy. Very rarely does that insurance policy get called, but it does get

42:21 called So like this summer is a good example of that. The winter storm, good example of that. And they're. baking in that price into their power, right? But you don't have to buy power from NG,

42:32 you don't have to buy it from Shell and buy it from whoever, and they all compete to get your business. So as

42:39 time goes on, and you're seeing more people put solar panels on their houses and all these other ways to kind of like curb their power usage or power reliance is maybe a better word, you can't do

42:51 that in other markets. If you wanna put solar panels on your house in Puerto Rico, you cannot Really? Oh, wow. There is a regulation for Puerto Rico, specifically maybe other places in the

43:02 States, that if you put solar panels on your house, you still have to pay for what you use because they see it as stealing money from the power company. 'Cause there's one power company. Now,

43:14 there's other places like this inside of Texas that we call co-ops, right? So like Austin is a good example of this. Austin, as far as ERCOT is concerned, is one meter and everybody inside of

43:25 Austin. is inside this co-op. Now, what they can do as the co-op owner is they can enroll in demand response programs. You don't get any of that upside. The co-op owners get that upside. So

43:38 there are regulated markets inside of ERCOT, and there are deregulated markets inside of ERCOT. Okay. So just to kind of make that distinction. Yeah, has Texas always had its own grid? I think

43:50 so, yeah. I'm just, my brain is sort of like grid history like, especially with Urkot being a private company, who started Urkot? Yeah, I'm not the - Could you imagine me like, I started Urkot?

44:02 Like, wow. Yeah. So I'm not super familiar on like the history of Urkot. I will be Googling. But I do know that there's a rule book that they have to play by. Yeah. By the PUC. So the utility

44:15 commission kind of like, there's a rule, set of rules that they have to abide by. Yeah. Yeah. The railroad commission, all that kind of stuff, so What would you, if you were in, like, the

44:25 CEO of Earth? Would you change anything in the way anything is done? They actually do a really good job. They frequently meet with large loads. There's the Texas Large Flexible Task Force. Large

44:38 load, I forget the name of it, but it's an initiative that was started by the Texas Blockchain Association. Urkop meets with these people monthly, and they say, you know, you guys doing good at

44:49 this, bad at this, we can help more help here. You know, if you do XYZ differently, it would help us So they're in large loads or in constant communication with Urkop, so. That's awesome. Yeah.

45:00 So for people that are reading some of these headlines, and especially after the winter storm, and people that don't understand

45:10 what it would be like to be a part of, if Texas didn't have their own grid and we were a part of just the US grid system, what would that look like? Sure, good question. It's a give and take,

45:20 right? So you wouldn't have had a big problem in the storm.

45:26 because we've been able to import more power of places that weren't having that kind of storm, right? Because we only use the power that's detected here. And all our tech systems. So we would have

45:36 been able to pull from other, okay. So we do have some that we can pull from Mexico. We do have some that we can pull from, I think, New Mexico and a couple of other places, but it's de minimis.

45:48 So that is one upside. If we were connected, we had more tie flows. We could have been just fine So like El Paso, no problem, they were cool, no problem. They had power, it was fine. However,

46:02 you're gonna have, you're gonna end up paying more for your power because of that. So it's kind of a give and take. What do you want? Do you want extreme reliability? Or do you want extremely

46:11 competitive pricing? You cannot have both. So, you know, the truth is, there's probably a balancing act somewhere in there. For sure. And the way ERCOT does that is with the insular services.

46:20 So their balancing act is we're still self-reliant, We're still gonna, you know. if we can make our loads communicate with our generators, then we'll be fine, and that is true. So that's where

46:31 these ancillary markets come in. And okay, my last question, and then we can wrap it up. A bunch of energy people were getting, I don't know if upset is the right word, but they were just on

46:44 Twitter as well, talking about the Bitcoin miners. Can you explain why it's important for Bitcoin miners? And I think you kind of already answered this with the hurts. I think that was the perfect

46:55 explanation, but why it's important for Bitcoin miners to really like ramp up in the middle of the day when load is less. Sure, I'm gonna actually pull up that tweet. So I think I entered it a

47:09 little bit more eloquently and well thought out than I will just bump in my gums right now

47:18 Because I get that question a lot and I also get the like, well, if miners weren't here in the first place, we wouldn't have these problems.

47:26 Which isn't true. Yeah, so that let's just start there if I get that one the most if well miners weren't even allowed that we wouldn't have this problem. Here's the reality, you will still have

47:36 those problems and I've linked a graph where In a news article, I think from 2017, maybe 2018, I don't remember where a Comanche peak fire happened 13 gigawatts fell offline. And the frequency of

47:50 the grid nose dived because it was like an unplanned thing, right? And that happens a lot, not a lot, but sometimes. Often enough. Yeah, sure. And that was when there was almost no mining in

48:02 Texas and the frequency took a huge nose dive and it was in the middle of the day And the answer to services responded. Now they responded very quickly. They respond to pick their load up as well.

48:16 not just down. Like it's not just cowed down. That's right. So that's why you saw Reg up and Reg down. Got it, got it, got it. Okay. So depending on what your asset is, right? Can you do

48:25 both? Maybe, maybe not.

48:28 So like Bitcoin miners, they can use more if they want to like overclock their machines, right? Or they can use less by turning off. So it depends on your asset. So those, the grid issues happen,

48:38 whether or not there's miners involved, right? And depending on which demand response program that's their service you're in, depends on like how much you're able to help. Not all miners can turn

48:50 off quickly. A lot of software is involved, a lot of technical know-how, a lot of operational expertise goes into that. So the large miners, they can do that very well. Smaller, maybe like

49:01 mid-sized miners, they can't because they don't have the custom software to do that. So in general, some of the miners weren't even on when all these problems were happening. So whether or not

49:12 miners are here or not It doesn't mean that the grid's going to have less frequency issues. Um, but the fact that they're here and they're very flexible allows the grid to kind of self heal itself,

49:24 uh, quickly.

49:28 What was your other question?

49:31 Uh, why is it, why is your turn on during the day, during the day, it is less. Sure. So, um, when load is less. Well, like during the day, when no one's using as much power. Sure. So, um,

49:42 let's talk about the weekends versus during the week, okay, because you go to work and this room probably uses more power than like a room in your house, right? So during the day, during the week,

49:54 middle of the day, that's when load peeks generally. Okay. Um, also there's a, so that's called the super peak. And then when everybody comes home and turns on their AC, that's another smaller

50:04 peak. Okay. So, uh, but because there's so much renewables, when the load is the secondary peak, the sun's not shining anymore, right? but people want to turn on their TVs and run there. So

50:21 giving large load back to the grid at that time, which is what miners would generally do when the secondary price spike happens, or secondary dispatch happens 'cause of frequency problems because

50:32 they can turn off and on so quickly at a moment's notice, quite literally a moment's notice, that allows the grid to just work well. 'Cause it's not getting cooler. Everybody knows that, it's

50:41 just getting hotter. And there's more people, and there's more houses, and there's just more and more and more of everything. Generators can't come online that fast, but if more loads can turn

50:51 off quicker, then it gives the generation time to kind of catch up. Right. 'Cause building a huge natural gas power plant, I mean, it's a very serious process, and it's not gonna happen in a

51:02 year, so. Yeah, we actually talked about that with Lisa. Do you remember just talking about how, she was talking about how if you kind of compare

51:14 with a Bitcoin miner, and I think she was talking in terms of this, which I think, back then, went over our head. Because we asked each other after, we were like, Did you understand what she

51:24 was talking

51:26 about? We didn't. Do you get in a room with these walking brains for power? Like, a lot of it, I've had to sit down, so I've only learned this stuff for the past four or five years, and it's by

51:36 going to lunch with people like that, you're just like, All right, please, tell me. Okay, one more time, 'cause I have no idea what you just said. Again? One more time, but like, stop it

51:44 down Yeah. So,

51:48 a lot of those things, I think, is why the education is important, and it's just really complicated stuff, because it's so nuanced, and you can go to any power company, and there's gonna be an

51:58 expert for everything, but that expert probably doesn't know what the next expert sitting next to him knows. Yep, yep, that's what we always talk about in energy. In general, like, most people

52:08 know everyone, doesn't know all the different parts There's so much to it. It's so complex. That's all I love watching I was Twitter too because there's so much so much ong stuff that I'm like what

52:19 is going on? Yeah, I like calling old tweet something like there's like co2 being blown off. I'm like dude This looks like a mad Max movie. What is going on? He's like oh, it's just a normal day,

52:28 and I'm like what?

52:30 So I mean it's it's the energy game is super is a wild place to be nuts, and I'm slowly learning trying to learn more but Well, you can learn more by listening to energy one-on-one. There you go

52:44 Awesome. I think did you have anything else that you wanted to explain or anything? Okay, I think this was good Yeah, no, I love this I Honestly, I like Whenever we have new topics that like

52:56 light bulbs go off and I can go back and other conversations and like put things together Mm-hmm. So this is really really good. I think it'll be helpful for a lot of people especially Being in the

53:07 summer and I feel like like you said in making like it's kind of a hot topic There's a lot of headlines coming out a lot of people that aren't in the industry at all. Yeah. Like I had a friend from

53:18 Jiu-Jitsu send it to us and they were like, what? What's going on? You guys are the devil. Yeah, right. Yes. And I'm not an expert. If you work in oil and gas, you're already the devil.

53:28 That's right. So get in line. Everyone. And this is like a learning thing. So, you know, sometimes I'll misspeaker, say something wrong. I love it too. Like I think I've said, LNP was like

53:41 live market price and it's a live marginal location, marginal price. It's part of like the real-time market. And so much like, oh, you don't know

53:50 what to talk about. You're wrong about everything. I don't know. That's why like we're talking and discussing like, I know some things, I don't know everything. And so it's, but it, no, it's

53:58 good. Like having these like learning things, I think it's super important. It's important. It is just containing education and just, like opening your brain and just be open to learning. To

54:08 learning So you actually understand it and can discern what is true and what is not so true, it's something I feel like more people do. In general with the mass media, just if the truth is probably

54:19 somewhere in the middle, you just take that. Somewhere. It just like buried under like layers of bullshit. Exactly. Click bait. Click bait. Yep. Do we wanna do that three questions? I feel

54:30 like we should do two, 'cause I feel like recently - Two. The first two are kind of the same. Yeah, okay. Rapid fire. Lay it on me. Number one, slash number two, 'cause we're combining them.

54:40 What is the biggest, let's do Bitcoin money. That's a good one, misconception about Bitcoin money. We usually say about energy, but I think we can get a little more specific. Biggest

54:51 misconception about Bitcoin mining is that we're harming the grid and taking money from taxpayers. Stop stealing our money.

55:01 The next one is what is your most embarrassing story in your career? You've got to have a good one. Yeah, you've got to have a good one. While he's thinking at the end of this year, We should

55:13 compilation. Yes, and we should pick our top three. Yeah. And give them a little shout out. Oh. We should be best embarrassing with them. Most embarrassing with - Congrats. Man, there's so

55:20 many, I don't know where to start. Tell us all of them Um

55:34 How'd you and got me a few years ago? I used to really get my feelings heard about getting my teeth kicked in by somebody, but I mean the reality is now it's just so used to being wrong that it's

55:44 kind of all one blur.

55:49 Probably it's not really about Bitcoin, I would say it's Bitcoin involved. Maybe saying something wrong in a foreign language that I don't know and making myself. I'll give you a good one I was in

55:59 China on my way to look at a friend's mind, and I was going through the Chinese TSA, and I kept going through the metal detector, and I kept having stuff in my pocket. And I tried to say, Sorry,

56:14 I'm just an idiot. But what came out was, You should be sorry because you're an idiot.

56:21 Wait, did you say it in Chinese? Yeah. And it didn't sink in until I was past security, and they kept pulling me back. I pulled me into the side and searched all my stuff. 'Cause they were like

56:32 this guy. What is going on? I was like, oh no, I said the wrong word. And so that one was pretty good. The whole flight was delayed because of that. And then of course everybody was like,

56:45 you're the white dude that like messed everything up. So that was - Because you were rude to - That's right, this imperialist foreigner making us late for our flight. That was a whole thing. That

56:54 was a pretty good one. That is funny That's terrifying to me. So don't say ni-o-bing, say wo-yo-bing. I'm dumb, not you're dumb. Yeah, how much Chinese do you speak? I would say I'm marginally

57:09 elementary at best. I mean, it's better with me. I'm good enough to order food and get some directions, get a cab, you know. I have my little five-year-old neighbor who's teaching me Chinese.

57:22 Nice. China's gonna take over, I'm hype

57:27 another discussion for another podcast. Yeah, yeah, yeah. Well, thank you for coming on. We will link your Twitter. You're a great follow-ups. Absolutely. Especially people. Like we were

57:38 saying really wanna learn. I feel like you post a lot of good educational. Yes, and he will be speaking at Empower, so. March 26th, 27th. 27th, 24. And if you don't come for the education,

57:48 you can stay for the shit posting. Yes. Always a good time. All right, catch you later.