May 11, 2023 · 48m · catalyst
The great Bitcoin energy debate
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of Catalyst, host Shail Khan and Wood Mackenzie's Ben Hertz-Shargel examine empirical data from a landmark New York Times investigation to dissect the true impacts of large-scale Bitcoin mining on electrical grids, consumer power prices, and carbon emissions. They systematically evaluate industry claims regarding load flexibility and renewable additionality, revealing the significant grid costs and decarbonization opportunity costs associated with proof-of-work cryptocurrency mining.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Shayle holds 30.4% of the talking time here. How this is scored →
Shayle as informed peer 5.1 Guest teaching 4.8 Guest disagreement 2.8 Shayle pushing back 2.3
speaking balance: gold is Shayle, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 27:14 The smoking analogy for demand response
The guest forcefully dismisses the common crypto industry argument that mining aids grid flexibility, asserting that pausing a newly created massive burden is merely the temporary absence of a harm.
Hardest push from Shayle ▶ 30:49 Host articulates the renewable price-signal argumentThe host challenges the guest's critique by systematically constructing the strongest version of the industry argument regarding price floors and offtake for curtailed wind in West Texas.
Biggest teaching moment ▶ 33:45 Applying the pigeonhole principle to renewable colocationThe guest explains mathematical allocation theory to demonstrate that colocating with clean power merely displaces existing renewable supply and increases system-wide fossil dispatch.
Shayle holds their own ▶ 37:55 Host outlines rigorous additionality and project finance criteriaThe host demonstrates deep domain expertise by detailing project finance requirements, investor IRR hurdle rates, and partial offtake structures needed for legitimate renewable additionality.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Shayle as informed peer | Guest teaching | Guest disagreement | Shayle pushing back | Why |
|---|---|---|---|---|---|---|
| Commercial Break: Bloom Energy, Engie, and Energy Hub | 0 | 0 | 0 | 0 | Sponsor advertisements and standard host introductory monologue introducing the podcast topic and guest. No substantive dialogue occurs. | |
| Scale and Geographic Clustering of US Bitcoin Mining | 4 | 3 | 1 | 2 | The host contextualizes the 3.9 GW scale against broader data center demand. The guest explains how geographic concentration in ERCOT gives it an outsized regional impact. | |
| Siting Decisions and Repurposing Defunct Power Plants | 6 | 5 | 2 | 3 | The host notes the surprising geographic cluster in the high-cost Northeast, astutely deducing that siting is driven by existing interconnection infrastructure at mothballed fossil plants. The guest details PPA minimum load factors. | |
| Overview and Methodology of the New York Times Study | 4 | 4 | 1 | 1 | The host asks for the methodology and origins of the New York Times investigation. The guest explains the collaboration between Wood Mackenzie and WattTime. | |
| Modeling Wholesale Power Prices and Consumer Rate Impacts | 5 | 6 | 2 | 2 | The guest explains ERCOT nodal grid modeling, supply curve walking, and forward power hedging dynamics that pass wholesale costs to retail consumers. The host presses for the bottom-line dollar figure for Texans. | |
| Marginal Emissions Analysis and Fossil Dispatch | 6 | 5 | 2 | 2 | The guest differentiates between average and marginal emissions analysis. The host correctly explains why marginal dispatch pulls almost exclusively from existing fossil generation rather than new builds. | |
| Commercial Break: Bloom Energy and Engie | 5 | 7 | 7 | 3 | The guest aggressively rejects the framing that Bitcoin mining is a net good because of demand response, comparing crediting miners to claiming smoking a pack a day is healthy because you pause at a family reunion. | |
| Power Purchase Resale and Grid Arbitrage Claims | 7 | 7 | 6 | 4 | The host articulates the pro-mining thesis that miners offer offtake for curtailed West Texas wind. The guest rejects the premise outright, walking through tenor mismatches and invoking the pigeonhole principle, while the host contributes insights on off-taker creditworthiness for project finance. | |
| Curtailed Renewable Energy and Colocation Realities | 8 | 6 | 4 | 4 | The host synthesizes two plausible economic scenarios where miners could drive additionality. The guest examines King Mountain data to prove that negative pricing happens only 12.5% of the time, meaning miners rely on the dirty grid the rest of the time. | |
| Evaluating Bitcoin Mining on Flared Natural Gas | 6 | 5 | 3 | 2 | Both agree that flared gas colocation can provide an emissions benefit by mitigating methane leakage. The guest highlights broader opportunity costs of energy transition hardware and points to Ethereum's proof of stake as a sustainable alternative. |
Statements from this episode (16)
Hertz-Shargel: US Bitcoin mining capacity is around 3.9 gigawatts
“So right now total capacity is around 3.9 gigawatts. And that is the finding of this New York Times study that I'm sure we'll be talking about a little bit later. Mines themselves, well, in terms of geography, they are scattered across the country, and we're Y…”
Hertz-Shargel: US Bitcoin mines range from 10MW to 450MW in capacity
“And you know, the mines themselves are pretty broad in terms of the range of capacity. They go down to around 10 megawatts and then up to four 50, which is the largest.”
Hertz-Shargel: Bitcoin Miners Restart Defunct NY Fossil Plants
“They also chase defunct oil and gas plants because those can be sort of rehydrated and turned on and used directly for mining. And so that has happened a lot, especially in New York, these sort of mothballed plants that are able to be turned on and run Pretty …”
Hertz-Shargel: Bitcoin mines operate online 78% to over 90% of the time
“What I have seen surveying a number of mines is they're kind of, they're online roughly in the high seventies in percentage, you know, say 78% of the time, all the way up to the high nineties.”
Hertz-Shargel: Some Bitcoin mining PPAs mandate over 85% load factor
“Some of the power purchase agreements That miners have secured require a high load factor, meaning, you know, you need a high average power relative to your max power, which basically requires you to be on most of the time. And so I've seen one contract that r…”
Hertz-Shargel: Bitcoin mining raises Texas power bills by $1.8B annually
“So collectively, it's 1.8 billion conservatively per year. And that's sort of a run rate, I would say. And that represents around a five percent increase in costs of Texans, of, you know non-Bitcoin mining consumers. And that, that's across all the different s…”
WattTime finds 85% of Bitcoin mining load is powered by fossil fuels
“And so Watt Time, that is the general methodology that they use. They found that 85% of incremental load from Bitcoin mining comes from coal and natural gas plants.”
Hertz-Shargel: Most Bitcoin mines can shed nearly 100% load in seconds
“Most mines can drop up to close to a hundred percent of their load within seconds, if not minutes.”
ERCOT Responsive Reserve Service paid $180 per kilowatt-year in 2022
“If you were to participate in the responsive reserve service, RRS, last year you would have earned a 180 dollars per kilowatt year, which is a really high number.”
Hertz-Shargel: Many Bitcoin miners run even at $4,000/MWh power prices
“Some miners do have a price threshold which empirically is between 103 hundred dollars per megawatt hour but many have basically no threshold, and they will continue running up even into the thousands, up to 4000 dollars per per megawatt hour.”
Hertz-Shargel: Grid power resale by Bitcoin miners creates no public good
“But really, the way to view this is, this was a generation that was sitting there that they were otherwise consuming. They are just refraining from consuming it at these, during these periods. So you can't credit them for, Again, for a good, you can only credi…”
Hertz-Shargel: Major Bitcoin mines are not signing offtake PPAs with new renewables
“So they are not signing new PPAs with new wind to as off takers to kind of make these plans happen. They're signing PPAs with retailers and utilities mostly conventional types of deals, such as being put on base interruptible rates. So, you know, it provides d…”
Hertz-Shargel: Siting Bitcoin mines beside existing renewables merely displaces clean power
“The reality is that The total number, the total amount of load on the system has grown, and therefore all you've done is displaced other customers who would be served by that renewable generation. So it's, and so your number of pigeons has grown, and so you kn…”
Hertz-Shargel: King Mountain nodes see negative pricing 12.5% of the time
“When you look at the transmission nodes where this project interconnects, you see negative pricing around 12 and a half percent of the time.”
Hertz-Shargel: Flared-gas Bitcoin mining appears to offer a net emissions benefit
“My understanding is that flaring is very kind of deeply imperfect in that you do a lot of methane leakage or more than you'd want, and that if you are properly capturing this flared gas, this gas, and you can run it through, you know, a sort of a gen set to, a…”