1 00:00:00,080 --> 00:00:02,480 Speaker 1: This is Dana Perkins and you're listening to Switch on 2 00:00:02,600 --> 00:00:05,360 Speaker 1: the B and EF podcast. So, as the saying goes, 3 00:00:05,600 --> 00:00:08,560 Speaker 1: everything's bigger in Texas, and for the last few years 4 00:00:08,640 --> 00:00:12,720 Speaker 1: that has also included swings in extreme weather conditions. When 5 00:00:12,760 --> 00:00:15,680 Speaker 1: storm Jury hit the state in February of twenty twenty one, 6 00:00:15,960 --> 00:00:18,360 Speaker 1: Texans rushed to heat their homes and the demand for 7 00:00:18,400 --> 00:00:23,000 Speaker 1: electricity outstripped supply, sending prices soaring to nine thousand dollars 8 00:00:23,000 --> 00:00:27,400 Speaker 1: a megawatt hour and causing blackouts At a critical moment. Urkott, 9 00:00:27,520 --> 00:00:30,319 Speaker 1: the state's grid operator, brought in reforms to avoid the 10 00:00:30,320 --> 00:00:32,800 Speaker 1: issue persisting, but from late June of this year, a 11 00:00:32,880 --> 00:00:37,600 Speaker 1: heat wave once again caused electricity prices to a times skyrocket. 12 00:00:38,200 --> 00:00:41,680 Speaker 1: So what makes Urkut and these price fluctuations so unique? 13 00:00:41,720 --> 00:00:44,239 Speaker 1: And as we prepare for more extreme weather, how might 14 00:00:44,280 --> 00:00:47,879 Speaker 1: the state, as an independent energy island of sorts adjust? 15 00:00:48,560 --> 00:00:50,800 Speaker 1: To explain what we might be able to learn from 16 00:00:50,800 --> 00:00:53,320 Speaker 1: this unique market. In today's show, I get to speak 17 00:00:53,320 --> 00:00:56,600 Speaker 1: with benf's head of research for North America, Thomas Rowland's 18 00:00:56,640 --> 00:01:01,320 Speaker 1: Rees and BNF's US power specialist Natalie Mandy Bratta. Together 19 00:01:01,400 --> 00:01:04,360 Speaker 1: we discuss Urcot and how it operates the Texas grid 20 00:01:04,480 --> 00:01:07,679 Speaker 1: and what this means for electricity prices. We also discuss 21 00:01:07,840 --> 00:01:11,520 Speaker 1: Texas's growing renewable energy rollout and where solar fits into 22 00:01:11,520 --> 00:01:15,080 Speaker 1: the equation, and finally, Bitcoin in Texas and how it 23 00:01:15,120 --> 00:01:19,080 Speaker 1: fits into grid flexibility. As always, if you like this podcast, 24 00:01:19,200 --> 00:01:22,520 Speaker 1: if you subscribe, you'll receive an update on future episodes, 25 00:01:22,720 --> 00:01:24,480 Speaker 1: and if you give us a review, it'll make us 26 00:01:24,520 --> 00:01:27,440 Speaker 1: more discoverable by others. But right now, let's jump into 27 00:01:27,520 --> 00:01:40,520 Speaker 1: the conversation with Tom and Natalie about Urkott. Natalie, thank 28 00:01:40,560 --> 00:01:41,480 Speaker 1: you for joining us today. 29 00:01:41,560 --> 00:01:43,280 Speaker 2: Thanks so much. Shanna, it's great to be here. 30 00:01:43,400 --> 00:01:45,160 Speaker 1: And Tom, thank you for coming on. 31 00:01:45,000 --> 00:01:47,000 Speaker 3: Switched on, Thank you so much for having me. 32 00:01:47,240 --> 00:01:49,280 Speaker 1: So, Tom, you've been with the business as long as 33 00:01:49,320 --> 00:01:52,560 Speaker 1: I have, which is, you know, since before we were 34 00:01:52,600 --> 00:01:55,080 Speaker 1: a part of Bloomberg. And for those who are listening now, 35 00:01:55,080 --> 00:01:57,160 Speaker 1: I thought we would have this moment where I was 36 00:01:57,200 --> 00:02:00,240 Speaker 1: thinking about saying, Tom, welcome back to the show today, 37 00:02:00,560 --> 00:02:03,800 Speaker 1: But actually you haven't been on with me, and you 38 00:02:03,880 --> 00:02:06,440 Speaker 1: were on one of our initial pilot episodes, which I 39 00:02:06,440 --> 00:02:08,760 Speaker 1: believe may not have seen the light of day. So 40 00:02:08,880 --> 00:02:11,800 Speaker 1: what is it that you're hoping to realize in today's show. 41 00:02:12,160 --> 00:02:16,040 Speaker 4: Well, firstly, I hope that we can give an entertaining podcast. 42 00:02:16,040 --> 00:02:18,320 Speaker 4: Then I think that so long as I'm not too boring, 43 00:02:18,360 --> 00:02:20,160 Speaker 4: we should be able to do that because we're going 44 00:02:20,200 --> 00:02:23,280 Speaker 4: to be talking about URKOT, the Texas power market, which 45 00:02:23,440 --> 00:02:27,239 Speaker 4: is like the Wild West of power markets. Everything is 46 00:02:27,360 --> 00:02:29,120 Speaker 4: just maxed out in URQUT. It's one of the most 47 00:02:29,160 --> 00:02:32,560 Speaker 4: interesting things that I've had the opportunity to study in 48 00:02:32,639 --> 00:02:34,760 Speaker 4: my varied career at BNFS. 49 00:02:34,800 --> 00:02:35,720 Speaker 3: So I'm really. 50 00:02:35,520 --> 00:02:39,000 Speaker 4: Hoping that we can convey why it's so interesting, why 51 00:02:39,000 --> 00:02:41,200 Speaker 4: it's so extreme, and also maybe to make a little 52 00:02:41,240 --> 00:02:43,960 Speaker 4: bit of a defense of ERCOT, because you know, one 53 00:02:43,960 --> 00:02:45,640 Speaker 4: of the things we'll talk about is it's kind of 54 00:02:45,639 --> 00:02:48,880 Speaker 4: fashionable to dunk on ERKOT because it's so extreme and 55 00:02:48,919 --> 00:02:52,239 Speaker 4: it's Texas. Everyone loves to say, oh, those crazy Texans 56 00:02:52,240 --> 00:02:54,960 Speaker 4: with their crazy power market, but it's actually been functioning 57 00:02:55,520 --> 00:02:58,840 Speaker 4: reasonably well lately in very challenging conditions, and I think 58 00:02:58,840 --> 00:03:00,840 Speaker 4: that's a story that is worth telling well. 59 00:03:00,840 --> 00:03:02,520 Speaker 1: And I bring up the fact that you haven't been 60 00:03:02,560 --> 00:03:04,520 Speaker 1: on the show yet because I almost couldn't believe it 61 00:03:04,560 --> 00:03:06,799 Speaker 1: when you said it, because you're one of my favorite 62 00:03:06,800 --> 00:03:09,040 Speaker 1: people to talk to about some of the more interesting 63 00:03:09,080 --> 00:03:11,520 Speaker 1: things that we are covering. So one of the reasons 64 00:03:11,560 --> 00:03:14,240 Speaker 1: we decided now was the right time to delve in 65 00:03:14,320 --> 00:03:17,480 Speaker 1: again into this very fascinating market had to do with 66 00:03:17,600 --> 00:03:22,240 Speaker 1: this recent wave of extremely warm weather across parts of 67 00:03:22,280 --> 00:03:25,200 Speaker 1: the US. But we're going to talk specifically about Texas. 68 00:03:25,280 --> 00:03:27,720 Speaker 1: Can you explain what happened and kind of the knock 69 00:03:27,760 --> 00:03:29,160 Speaker 1: on effects to the grid. 70 00:03:29,600 --> 00:03:33,760 Speaker 4: Sure, So, in early June, the weather forecasts started really 71 00:03:33,800 --> 00:03:37,520 Speaker 4: shooting up to I'm now in the US and I've 72 00:03:37,680 --> 00:03:41,880 Speaker 4: completely converted to speaking in terms of fahrenheit. I'm a convert, so. 73 00:03:41,840 --> 00:03:44,160 Speaker 1: I'm a convert to celsius. So now I'm gonna have 74 00:03:44,200 --> 00:03:46,400 Speaker 1: to calculate it on my phone while you're talking. 75 00:03:46,720 --> 00:03:50,280 Speaker 4: So basically, what I've learned is the reason fahrenheit works 76 00:03:50,360 --> 00:03:52,800 Speaker 4: is that anything above a hundred is like super hot. 77 00:03:53,040 --> 00:03:57,040 Speaker 4: And for about two months now, Texas has had temperatures 78 00:03:57,080 --> 00:03:59,360 Speaker 4: that are above a hundred during the day, and so 79 00:03:59,480 --> 00:04:02,200 Speaker 4: that is really when you're in the times when heat 80 00:04:02,240 --> 00:04:06,040 Speaker 4: starts to affect infrastructure, it's it's not safe. 81 00:04:06,360 --> 00:04:07,800 Speaker 3: So it's it's been very extreme. 82 00:04:07,880 --> 00:04:11,280 Speaker 4: And to put this in context, in the US and 83 00:04:11,320 --> 00:04:13,960 Speaker 4: a lot of other power markets around the world summertime 84 00:04:14,040 --> 00:04:16,040 Speaker 4: and the sort of the hottest day of the year 85 00:04:16,279 --> 00:04:18,520 Speaker 4: is what they all plan for because that's when air 86 00:04:18,520 --> 00:04:21,640 Speaker 4: conditioning demand is at its highest, and so it's when 87 00:04:21,760 --> 00:04:25,880 Speaker 4: electricity demand is at its highest. So the combination of 88 00:04:25,880 --> 00:04:29,360 Speaker 4: a sustained period of heat and that has then led 89 00:04:29,400 --> 00:04:32,600 Speaker 4: to record power demand means that URKOT has really been 90 00:04:32,640 --> 00:04:35,799 Speaker 4: getting put to the test over the course of this summer. 91 00:04:36,279 --> 00:04:39,279 Speaker 1: And you'd reference that our cuts are particularly interesting. But also, 92 00:04:39,360 --> 00:04:42,159 Speaker 1: let's say unique power market, So can you explain what 93 00:04:42,360 --> 00:04:44,560 Speaker 1: is it that makes it different from let's say, other 94 00:04:44,600 --> 00:04:45,880 Speaker 1: states in the United States. 95 00:04:46,200 --> 00:04:49,159 Speaker 4: There's a couple of things that make it different. One 96 00:04:49,200 --> 00:04:52,960 Speaker 4: is just generally across the United States power markets, the 97 00:04:53,080 --> 00:04:56,280 Speaker 4: regulatory structure is a lot more varied, and you can 98 00:04:56,320 --> 00:05:01,680 Speaker 4: see a lot more of hybrids between regulated and liberalized markets. 99 00:05:01,920 --> 00:05:06,760 Speaker 4: Actually URKO is the least regulated, which of course everyone says, huh, 100 00:05:06,839 --> 00:05:09,880 Speaker 4: typical Texas, But actually being the least regulated means that 101 00:05:09,920 --> 00:05:13,520 Speaker 4: it most resembles a European power market in that generation 102 00:05:13,760 --> 00:05:17,400 Speaker 4: is competitive and retail is competitive, and actually having competitive 103 00:05:17,400 --> 00:05:20,240 Speaker 4: retail is somewhat rare in the US. But also is 104 00:05:20,279 --> 00:05:23,039 Speaker 4: that it is an energy only market, which means that 105 00:05:23,320 --> 00:05:26,440 Speaker 4: all of the incentives for say, plants that just are 106 00:05:26,480 --> 00:05:28,600 Speaker 4: there for that hottest day of the year are not 107 00:05:28,720 --> 00:05:31,320 Speaker 4: through things like capacity markets like you see in other 108 00:05:31,560 --> 00:05:35,599 Speaker 4: markets like PJM or in GB in the UK, but 109 00:05:35,720 --> 00:05:38,320 Speaker 4: it's all through a mechanism where it just says, oh, 110 00:05:38,360 --> 00:05:41,159 Speaker 4: on those days is designed to have prices go to 111 00:05:41,240 --> 00:05:43,960 Speaker 4: really extreme levels so that those plants can make their 112 00:05:44,000 --> 00:05:46,120 Speaker 4: money in the space of a couple of hours a year. 113 00:05:46,240 --> 00:05:48,919 Speaker 4: That makes it viable for them to stay online. But 114 00:05:48,960 --> 00:05:51,400 Speaker 4: that means that it's it's quite volatile, and it's quite 115 00:05:51,440 --> 00:05:53,839 Speaker 4: People sometimes describe it as a casino because if that 116 00:05:54,000 --> 00:05:57,080 Speaker 4: day where prices explode doesn't come, then those plants don't 117 00:05:57,120 --> 00:05:59,160 Speaker 4: make enough money. And if you get more of those 118 00:05:59,240 --> 00:06:01,640 Speaker 4: days than you need, then those plants make way more 119 00:06:01,640 --> 00:06:04,680 Speaker 4: money than they need. And ultimately the cost is passed 120 00:06:04,720 --> 00:06:07,320 Speaker 4: on to consumers via the competitive retailers. 121 00:06:07,360 --> 00:06:07,760 Speaker 3: And then I. 122 00:06:07,720 --> 00:06:10,560 Speaker 4: Suppose the competitive retailers have this challenge of how do 123 00:06:10,600 --> 00:06:13,280 Speaker 4: we offer the best deal whilst managing this risk. 124 00:06:13,520 --> 00:06:15,880 Speaker 3: So that's kind of why Texas is so interesting. 125 00:06:16,080 --> 00:06:18,839 Speaker 2: I'll just add on the last point you had about 126 00:06:18,880 --> 00:06:22,800 Speaker 2: the energy only market. The mechanism that Urcott has are 127 00:06:22,839 --> 00:06:26,080 Speaker 2: these scarcity adders, and those are happening in real time. 128 00:06:26,279 --> 00:06:29,960 Speaker 2: So when reserves drop a certain threshold, Urcott adds to 129 00:06:30,080 --> 00:06:34,159 Speaker 2: the power price to incentivize more power plants to come online. 130 00:06:34,240 --> 00:06:36,839 Speaker 2: I think a coworker compared it to Uber surge pricing, 131 00:06:37,000 --> 00:06:41,000 Speaker 2: and I say, the other uniqueness of URCOT that people 132 00:06:41,120 --> 00:06:43,400 Speaker 2: remember is that it's an island grid, so it's not 133 00:06:43,440 --> 00:06:47,160 Speaker 2: connected to the eastern or western connection, so when supplies 134 00:06:47,520 --> 00:06:52,200 Speaker 2: are low, they can't rely on imports from neighboring balancing authorities. 135 00:06:52,080 --> 00:06:55,760 Speaker 1: No ability to buy or sell any access capacity or 136 00:06:55,800 --> 00:06:56,840 Speaker 1: required capacity. 137 00:06:57,000 --> 00:06:58,360 Speaker 3: Correct And just. 138 00:06:58,320 --> 00:07:01,600 Speaker 4: To put it in context, Natalie, what does say the 139 00:07:01,640 --> 00:07:04,560 Speaker 4: power price on a typical day and how high can 140 00:07:04,600 --> 00:07:06,440 Speaker 4: it go when we have these extreme prices. 141 00:07:06,800 --> 00:07:11,440 Speaker 2: I'd say probably between sixty e eighty dollars per megawat 142 00:07:11,840 --> 00:07:15,040 Speaker 2: and a typical day. But on these extreme days, for example, 143 00:07:15,080 --> 00:07:18,200 Speaker 2: on June twenty, we saw prices go to a close 144 00:07:18,200 --> 00:07:20,760 Speaker 2: of five thousand dollars per megawatt, and just on July 145 00:07:20,920 --> 00:07:23,680 Speaker 2: thirty one, we saw prices to twenty three hundred and 146 00:07:23,680 --> 00:07:24,440 Speaker 2: fifty dollars. 147 00:07:24,880 --> 00:07:27,400 Speaker 1: What does this mean for retail customers like you and me? 148 00:07:27,720 --> 00:07:30,960 Speaker 4: That's a really interesting question because it is the job 149 00:07:31,000 --> 00:07:34,800 Speaker 4: of the retailers to manage this risk and offer customers 150 00:07:35,280 --> 00:07:38,240 Speaker 4: a deal that is palatable. So from a customer's point 151 00:07:38,280 --> 00:07:41,240 Speaker 4: of view, they should just see that their energy provider 152 00:07:41,520 --> 00:07:43,400 Speaker 4: offers them a deal for certain period of time and 153 00:07:43,440 --> 00:07:46,400 Speaker 4: a price by magwa hour, and those energy providers have 154 00:07:46,520 --> 00:07:49,480 Speaker 4: to go into the market and procure their energy and 155 00:07:49,680 --> 00:07:51,880 Speaker 4: manage this risk, and you know, the deal they offer 156 00:07:51,920 --> 00:07:54,200 Speaker 4: customers is kind of a reflection of can they make 157 00:07:54,240 --> 00:07:56,760 Speaker 4: a slight profit of while managing this risk. The reason 158 00:07:56,760 --> 00:08:00,000 Speaker 4: I say it's interesting is because everything was so unregulated 159 00:08:00,200 --> 00:08:03,720 Speaker 4: in Texas and they had competitive retail, which is somewhat 160 00:08:03,800 --> 00:08:07,040 Speaker 4: unique in the US, although it's kind of commonplace in 161 00:08:07,080 --> 00:08:09,200 Speaker 4: Europe and men. There was a lot of innovation and 162 00:08:09,320 --> 00:08:12,920 Speaker 4: one of the very innovative ideas was a retailer called 163 00:08:12,960 --> 00:08:15,760 Speaker 4: Griddy who said, you know what, rather than just say 164 00:08:15,800 --> 00:08:19,400 Speaker 4: offering customers are fixed tariff, why don't we say let's 165 00:08:19,520 --> 00:08:23,360 Speaker 4: just give them exposure to wholesale power prices. I either 166 00:08:23,400 --> 00:08:26,280 Speaker 4: hourly market will meet that using a smart meter and 167 00:08:26,360 --> 00:08:28,440 Speaker 4: build them for it, and they'll just pay us a 168 00:08:28,440 --> 00:08:30,280 Speaker 4: monthly fee. And you know, you run the numbers and 169 00:08:30,320 --> 00:08:32,440 Speaker 4: this would say, like in twenty sixteen, they were saying this, 170 00:08:32,480 --> 00:08:34,280 Speaker 4: you run the numbers on look, look at how wholesale 171 00:08:34,280 --> 00:08:36,680 Speaker 4: prices have been. That'll end up working out cheaper for 172 00:08:36,800 --> 00:08:38,920 Speaker 4: you if you're okay with taking on that risk. I 173 00:08:38,960 --> 00:08:41,200 Speaker 4: guess we're going to get on to talking about winter 174 00:08:41,240 --> 00:08:43,920 Speaker 4: Storm Ury in February twenty twenty one, when the lights 175 00:08:43,960 --> 00:08:47,160 Speaker 4: went out but prices went to these high levels. That 176 00:08:47,240 --> 00:08:51,199 Speaker 4: deal worked out extremely badly in that set of circumstances, 177 00:08:51,240 --> 00:08:54,480 Speaker 4: and it was because no one anticipated that something like 178 00:08:54,640 --> 00:08:58,280 Speaker 4: winter Storm Ury would happen, and so these customers half 179 00:08:58,320 --> 00:09:00,120 Speaker 4: the time they didn't have any power, and then when 180 00:09:00,160 --> 00:09:02,720 Speaker 4: the power was on, it was costing ten thousand dollars 181 00:09:02,760 --> 00:09:04,920 Speaker 4: per megawat hour or something like that, and they were 182 00:09:05,040 --> 00:09:07,920 Speaker 4: ending up with bills that were tens of thousands of 183 00:09:07,960 --> 00:09:10,480 Speaker 4: dollars that they couldn't possibly pay. And there are a 184 00:09:10,520 --> 00:09:13,840 Speaker 4: lot of defaulting and financial pain happening off the back 185 00:09:13,880 --> 00:09:16,440 Speaker 4: of this. So, in answer to your question, retailers are 186 00:09:16,440 --> 00:09:18,959 Speaker 4: supposed to be innovative, supposed to manage the risk, there 187 00:09:19,000 --> 00:09:21,200 Speaker 4: have been some missteps along the way. 188 00:09:21,440 --> 00:09:24,120 Speaker 1: We did a podcast back in twenty twenty one after 189 00:09:24,280 --> 00:09:27,640 Speaker 1: Storm Mury which was this extreme cold front in Texas, 190 00:09:27,679 --> 00:09:31,680 Speaker 1: which also did cause extreme prices and actually had some 191 00:09:31,840 --> 00:09:35,600 Speaker 1: really terrible consequences. What do you think between then and now, 192 00:09:35,679 --> 00:09:38,400 Speaker 1: between Storm Mury so extreme cold and now we're dealing 193 00:09:38,480 --> 00:09:42,120 Speaker 1: with extreme heat, how has the grid innovated, how has 194 00:09:42,160 --> 00:09:44,440 Speaker 1: it changed, how is it adapted? And how is the 195 00:09:44,440 --> 00:09:46,319 Speaker 1: story different this time around? 196 00:09:46,920 --> 00:09:49,040 Speaker 2: I think there are too answer to that. The first 197 00:09:49,040 --> 00:09:50,760 Speaker 2: one is the retail one, if you want to tackle 198 00:09:50,800 --> 00:09:53,240 Speaker 2: that time, and I can talk about Urkard broadly. 199 00:09:53,240 --> 00:09:56,080 Speaker 4: Sure, I mean, I suppose on the retail side, I 200 00:09:56,120 --> 00:09:58,600 Speaker 4: don't think. I mean, Nanati can correct me if I'm wrong. 201 00:09:58,679 --> 00:10:01,200 Speaker 4: I don't think that there has been any the major 202 00:10:01,320 --> 00:10:05,240 Speaker 4: reform apart from there's just a lot more caution. So 203 00:10:05,559 --> 00:10:07,959 Speaker 4: I don't think anyone in their right mind is either 204 00:10:08,040 --> 00:10:12,040 Speaker 4: signing up to or selling contracts that expose customers to 205 00:10:12,320 --> 00:10:16,199 Speaker 4: hourly wholesale prices, because everyone saw how badly that went 206 00:10:16,240 --> 00:10:18,680 Speaker 4: in twenty twenty one, so it's it's maybe just a 207 00:10:18,679 --> 00:10:21,520 Speaker 4: little bit more conservative now, and perhaps that's not a 208 00:10:21,559 --> 00:10:24,360 Speaker 4: bad thing. I know we talk a lot about retail innovation, 209 00:10:24,600 --> 00:10:28,079 Speaker 4: and that's part of the rationale for having competitive retail 210 00:10:28,120 --> 00:10:31,480 Speaker 4: in both Europe and Texas, but maybe sometimes too much 211 00:10:31,520 --> 00:10:34,840 Speaker 4: innovation is too risky, and so my understanding is that 212 00:10:35,080 --> 00:10:37,120 Speaker 4: it's maybe a little bit more conventional in the way 213 00:10:37,120 --> 00:10:40,360 Speaker 4: that they are are hedging the risks and then billing customers. 214 00:10:40,720 --> 00:10:44,880 Speaker 2: Urkat has introduced a few changes since Winter Storm Mury. 215 00:10:45,120 --> 00:10:48,480 Speaker 2: The first is like short term market changes, the major 216 00:10:48,559 --> 00:10:51,160 Speaker 2: one being during Winter Storm Muri, your price is went 217 00:10:51,200 --> 00:10:53,959 Speaker 2: to nine thousand dollars per megawatt. That was the system 218 00:10:54,000 --> 00:10:56,960 Speaker 2: cap for their scarcity adder. They reduced that to five 219 00:10:57,000 --> 00:11:00,000 Speaker 2: thousand dollars per megawat, which is why we saw price 220 00:11:00,200 --> 00:11:02,880 Speaker 2: is around that level this summer. The scarcity adder also 221 00:11:03,120 --> 00:11:07,880 Speaker 2: kicks in at a higher reserve level, so it's more conservative. Basically, 222 00:11:07,920 --> 00:11:11,640 Speaker 2: prices will increase at a higher level than before to 223 00:11:11,720 --> 00:11:14,160 Speaker 2: try and get power plants to come online. They've also 224 00:11:14,200 --> 00:11:19,040 Speaker 2: added more ancillary services, which is another reliability service that 225 00:11:19,200 --> 00:11:23,400 Speaker 2: Urcott has. But they've done a whole study to improve 226 00:11:23,520 --> 00:11:27,080 Speaker 2: long term market design. The major one that passed earlier 227 00:11:27,120 --> 00:11:30,920 Speaker 2: this year is called a performance credit mechanism. It's a 228 00:11:30,960 --> 00:11:34,120 Speaker 2: capacity like payment. So as we talked about before, other 229 00:11:34,160 --> 00:11:37,520 Speaker 2: markets have capacity markets that procure enough supply over a 230 00:11:37,520 --> 00:11:40,400 Speaker 2: certain number of years. Orcott has famously been an energy 231 00:11:40,440 --> 00:11:43,280 Speaker 2: only market, but is trying to introduce this new payment 232 00:11:43,360 --> 00:11:47,000 Speaker 2: that is more predictable and can be another revenue to 233 00:11:47,080 --> 00:11:50,080 Speaker 2: power plants other than these extreme price fikes. 234 00:11:50,360 --> 00:11:52,760 Speaker 4: See the other thing I would say, though, that has changed, 235 00:11:52,880 --> 00:11:55,480 Speaker 4: and maybe you don't say Urcott has changed this. It's 236 00:11:55,559 --> 00:11:58,600 Speaker 4: just something that has changed generally is that there's a 237 00:11:58,679 --> 00:12:02,239 Speaker 4: huge amount of solo beein to the grid. So typically 238 00:12:02,480 --> 00:12:05,840 Speaker 4: these price spikes, apart from February twenty twenty one, which 239 00:12:05,880 --> 00:12:10,360 Speaker 4: was an exceptional set of circumstances, typically you're expecting these 240 00:12:10,440 --> 00:12:13,480 Speaker 4: price extremes, this lottery as we describe it, to happen 241 00:12:13,559 --> 00:12:16,559 Speaker 4: during the summer and when the temperature is high, i e. 242 00:12:16,760 --> 00:12:17,960 Speaker 3: During the day all day. 243 00:12:18,320 --> 00:12:21,080 Speaker 4: Now, there's so much solar being added and still being 244 00:12:21,120 --> 00:12:24,200 Speaker 4: added in Texas, it's enough now that we're at a 245 00:12:24,240 --> 00:12:27,400 Speaker 4: stage where for most of the day you can rely 246 00:12:27,679 --> 00:12:31,600 Speaker 4: on solar generating enough to meet that high demand, and 247 00:12:31,800 --> 00:12:34,640 Speaker 4: so these price spikes aren't going to happen and won't 248 00:12:34,640 --> 00:12:37,600 Speaker 4: be necessary. And it's only now during a more limited 249 00:12:37,640 --> 00:12:41,120 Speaker 4: time window that during the late afternoon when the solar 250 00:12:41,120 --> 00:12:43,560 Speaker 4: generation is ramping down but it's still hot that you 251 00:12:43,720 --> 00:12:46,559 Speaker 4: still have the possibility of these price extremes. And so 252 00:12:46,679 --> 00:12:51,439 Speaker 4: while while solar doesn't completely eliminate this dynamic, it certainly 253 00:12:52,040 --> 00:12:55,439 Speaker 4: reduced the probability of it and made it maybe a 254 00:12:55,480 --> 00:12:58,520 Speaker 4: little bit more healthy and restricted, I suppose. 255 00:12:58,800 --> 00:13:02,160 Speaker 1: So between this cold snap which happened in twenty twenty 256 00:13:02,200 --> 00:13:06,480 Speaker 1: one which really impacted the gas pipelines and wind power, 257 00:13:06,679 --> 00:13:09,640 Speaker 1: we now have this additional solar that's been coming online 258 00:13:09,640 --> 00:13:12,959 Speaker 1: over the past several years that's really creating or evening 259 00:13:13,000 --> 00:13:16,680 Speaker 1: out the access in summertime. But as you point out rightfully, 260 00:13:16,840 --> 00:13:19,720 Speaker 1: these spikes do tend to happen in terms of demand 261 00:13:19,920 --> 00:13:22,480 Speaker 1: in the afternoon till late afternoon, often as the sun 262 00:13:22,520 --> 00:13:25,199 Speaker 1: is setting and people are heading home returning home after work. 263 00:13:25,320 --> 00:13:27,199 Speaker 1: And my question really has to do with with all 264 00:13:27,240 --> 00:13:30,000 Speaker 1: of this renewables roll out in Texas, are we also 265 00:13:30,120 --> 00:13:34,160 Speaker 1: seeing storage or are we seeing grid flexibility being built 266 00:13:34,200 --> 00:13:36,440 Speaker 1: in What are the mechanisms in place in order to 267 00:13:36,480 --> 00:13:39,800 Speaker 1: meet that late afternoon peak energy demand. 268 00:13:40,120 --> 00:13:44,240 Speaker 2: Solar actually generates during that late afternoon peak of six pm, 269 00:13:44,360 --> 00:13:47,360 Speaker 2: but it's we are now seeing that peak net demand, 270 00:13:47,400 --> 00:13:50,840 Speaker 2: which is demand minus renewables, happen when solar comes offline. 271 00:13:50,960 --> 00:13:55,240 Speaker 2: Eight to nine pm, so that more predictable renewables waiting off, 272 00:13:55,400 --> 00:13:58,440 Speaker 2: more solar waning off could cause price spikes that happened 273 00:13:58,520 --> 00:14:01,680 Speaker 2: later in the day. That what we've typically seen, which 274 00:14:01,679 --> 00:14:04,240 Speaker 2: has been driven by demand in people coming home. 275 00:14:04,640 --> 00:14:07,640 Speaker 4: And to your question around storage data, that is creating 276 00:14:07,640 --> 00:14:10,400 Speaker 4: an opportunity for storage. It's a very well defined time 277 00:14:10,440 --> 00:14:13,040 Speaker 4: window where high prices are expected. You know, we've seen 278 00:14:13,080 --> 00:14:16,720 Speaker 4: it in California that solar gets built and then storage follows. 279 00:14:17,040 --> 00:14:19,760 Speaker 4: We're seeing the same happening in Texas. It's maybe at 280 00:14:19,800 --> 00:14:22,680 Speaker 4: an earlier stage, but yeah, we are expecting in the 281 00:14:22,720 --> 00:14:25,640 Speaker 4: next few years now a substantial amount of storage to 282 00:14:25,640 --> 00:14:28,480 Speaker 4: get built in Texas to complement the solar. 283 00:14:30,560 --> 00:14:33,320 Speaker 1: Another show that we previously did, which we probably should 284 00:14:33,360 --> 00:14:35,680 Speaker 1: have also featured you in tom was one that was 285 00:14:35,720 --> 00:14:41,080 Speaker 1: around servers and as a potential source of flexible capacity. 286 00:14:41,240 --> 00:14:44,800 Speaker 1: And this brings me to another point around well, certainly 287 00:14:44,840 --> 00:14:47,360 Speaker 1: something that puts a lot of demand on servers, which 288 00:14:47,400 --> 00:14:50,840 Speaker 1: is bitcoin mining. There's an interesting connection here to Urka, 289 00:14:50,960 --> 00:14:52,840 Speaker 1: and we'll come to that, but before we go there, 290 00:14:53,160 --> 00:14:56,200 Speaker 1: talk a little bit about well, bitcoin mining and why 291 00:14:56,240 --> 00:14:59,640 Speaker 1: is it so energy intensive and require so many servers? 292 00:15:00,560 --> 00:15:02,760 Speaker 4: So that's a good question because in a way, I 293 00:15:02,880 --> 00:15:06,840 Speaker 4: understand very well the impact that bitcoin mining has on 294 00:15:06,880 --> 00:15:10,240 Speaker 4: the energy system, but I'm certainly not a bitcoin expert. 295 00:15:10,440 --> 00:15:14,080 Speaker 4: But the way bitcoin works is that the system is 296 00:15:14,120 --> 00:15:18,520 Speaker 4: built around that you create new bitcoins by solving complex 297 00:15:18,560 --> 00:15:22,520 Speaker 4: computational problems, and you get rewarded with bitcoins for doing that, 298 00:15:22,640 --> 00:15:26,680 Speaker 4: and you also, in doing so facilitate processing of transactions 299 00:15:26,800 --> 00:15:30,320 Speaker 4: in the bitcoin market, and over time, the amount of 300 00:15:30,480 --> 00:15:34,480 Speaker 4: energy required to create every bitcoin increases, the idea being 301 00:15:34,480 --> 00:15:37,720 Speaker 4: that eventually all the bitcoins that are possible to be 302 00:15:37,760 --> 00:15:40,000 Speaker 4: created will be created, but at that point in time, 303 00:15:40,040 --> 00:15:42,960 Speaker 4: it will be really energy intensive to create a bitcoin. 304 00:15:43,240 --> 00:15:45,080 Speaker 4: Now I know that when I say, oh, it's very 305 00:15:45,160 --> 00:15:47,920 Speaker 4: energy intensive, everyone has a sort of a knee jerk 306 00:15:48,000 --> 00:15:51,960 Speaker 4: reaction and says, that's so bad, that it's so energy intensive, 307 00:15:52,120 --> 00:15:54,960 Speaker 4: And I actually just want to maybe temper that a 308 00:15:54,960 --> 00:15:58,160 Speaker 4: little bit. If you have, say, servers that consume a 309 00:15:58,200 --> 00:16:01,880 Speaker 4: megawatt of power, and it costs barely any energy to 310 00:16:02,000 --> 00:16:05,440 Speaker 4: produce some bitcoins, then you're just going to produce more bitcoins. 311 00:16:05,720 --> 00:16:07,960 Speaker 4: The fact that it's more energy intensive just means that 312 00:16:08,000 --> 00:16:10,240 Speaker 4: you're still going to run your server the same amount, 313 00:16:10,360 --> 00:16:13,400 Speaker 4: you'll just get less bitcoins from doing it, And actually 314 00:16:13,440 --> 00:16:15,960 Speaker 4: that means you're more likely to switch off when power 315 00:16:16,000 --> 00:16:19,520 Speaker 4: prices are too high, which is normally when fossil generation 316 00:16:19,640 --> 00:16:22,160 Speaker 4: is happening. So Bitcoin gets a little bit of a 317 00:16:22,160 --> 00:16:24,640 Speaker 4: bad rap for being so energy intensive, and I sometimes 318 00:16:24,680 --> 00:16:27,080 Speaker 4: think that maybe misses the point a little bit. 319 00:16:27,400 --> 00:16:30,680 Speaker 1: But there is this flexibility element just built in inherently 320 00:16:30,720 --> 00:16:32,160 Speaker 1: to the way the market functions. 321 00:16:32,680 --> 00:16:35,880 Speaker 4: Yeah, and you only get that flexibility element because it's 322 00:16:35,960 --> 00:16:36,800 Speaker 4: energy intensive. 323 00:16:37,080 --> 00:16:40,000 Speaker 1: Well, let's back up still one more, which is is 324 00:16:40,040 --> 00:16:43,640 Speaker 1: bitcoin very common in Texas? Like what's the connection between 325 00:16:43,920 --> 00:16:45,080 Speaker 1: er cut and bitcoin. 326 00:16:45,360 --> 00:16:47,680 Speaker 4: I'm going to let Natalie give you the numbers, although 327 00:16:47,720 --> 00:16:50,320 Speaker 4: I know what they are, but I will just anecdotally 328 00:16:50,360 --> 00:16:50,720 Speaker 4: tell you. 329 00:16:51,920 --> 00:16:53,200 Speaker 3: I'll just anecdote. 330 00:16:52,760 --> 00:16:55,240 Speaker 4: Because I feel like she found out these numbers, but 331 00:16:55,240 --> 00:16:57,640 Speaker 4: I'll anecdotally tell you when she was working on the 332 00:16:57,760 --> 00:17:01,000 Speaker 4: Erko market outlook and she told me, oh, Tom, oh, 333 00:17:01,040 --> 00:17:04,320 Speaker 4: bitcoin is a big factor in Texas, and I was thinking, oh, 334 00:17:04,320 --> 00:17:06,920 Speaker 4: that's nice, a nice little side story, and she told 335 00:17:06,920 --> 00:17:10,800 Speaker 4: me the numbers, and I was My first reaction was like, Natalie, 336 00:17:10,880 --> 00:17:13,080 Speaker 4: I think you might have got your units mixed up 337 00:17:13,200 --> 00:17:16,560 Speaker 4: because the numbers were so unbelievable. But Natalie tell us 338 00:17:16,560 --> 00:17:18,480 Speaker 4: what those numbers are, and I will just say she 339 00:17:18,600 --> 00:17:20,240 Speaker 4: hasn't got her units mixed up. 340 00:17:20,760 --> 00:17:24,480 Speaker 2: Yeah, Urkott has about two gigawatts of bitcoin mining capacity 341 00:17:24,920 --> 00:17:27,560 Speaker 2: online that has sprung up in the last year or two. 342 00:17:28,000 --> 00:17:31,359 Speaker 2: Baseload demand in Urcott is forty five to fifty gigawatts, 343 00:17:31,400 --> 00:17:34,800 Speaker 2: so that's not sensitive to temperature. So assuming bitcoin is 344 00:17:34,880 --> 00:17:38,520 Speaker 2: running around the clock except during the stressful grid hours, 345 00:17:38,800 --> 00:17:42,040 Speaker 2: that's about two to three percent of Urcott's basedload demand. 346 00:17:42,359 --> 00:17:44,800 Speaker 1: Now, what does it look like going forward? And is 347 00:17:44,880 --> 00:17:47,960 Speaker 1: Texas a growing market for bitcoin miners. 348 00:17:48,640 --> 00:17:53,000 Speaker 2: Yes, Urcott has its own like large load Interconnection Q, 349 00:17:53,480 --> 00:17:57,280 Speaker 2: similar to on the renewable side of Interconnection Q, except 350 00:17:57,320 --> 00:18:00,199 Speaker 2: for these large loads, and it has about thirty seven 351 00:18:00,280 --> 00:18:03,760 Speaker 2: gigawatts of these they're most likely duplicate projects and not 352 00:18:03,840 --> 00:18:06,880 Speaker 2: all of them will come online, but we did here 353 00:18:07,240 --> 00:18:10,640 Speaker 2: enough create a project database based on company announcements, and 354 00:18:10,880 --> 00:18:13,000 Speaker 2: there could be five to six gigawatts in the next 355 00:18:13,080 --> 00:18:13,639 Speaker 2: few years. 356 00:18:13,880 --> 00:18:16,720 Speaker 1: Now, when you first looked at those numbers, Tom certainly 357 00:18:16,760 --> 00:18:18,880 Speaker 1: told us what his initial reaction was when you brought 358 00:18:18,880 --> 00:18:21,520 Speaker 1: them to him. But when you stumbled upon this you 359 00:18:21,520 --> 00:18:25,000 Speaker 1: know or didn't stumble upon when you researched this particular 360 00:18:25,160 --> 00:18:28,720 Speaker 1: heart of Texas's energy grid. What was your initial thought. 361 00:18:28,960 --> 00:18:31,439 Speaker 2: Yeah, it was an interesting thing to track since there 362 00:18:31,480 --> 00:18:34,000 Speaker 2: was a lot of news articles of bitcoin mining flocking 363 00:18:34,040 --> 00:18:37,480 Speaker 2: to Texas and a lot of politicians welcoming them into 364 00:18:37,560 --> 00:18:40,720 Speaker 2: their towns and cities. So we wanted a way to 365 00:18:40,800 --> 00:18:44,440 Speaker 2: quantify how big of an impact this was, which is 366 00:18:44,480 --> 00:18:46,480 Speaker 2: why we had to track in on a project a 367 00:18:46,560 --> 00:18:50,440 Speaker 2: project basis and found those massive numbers. And the other 368 00:18:50,480 --> 00:18:53,080 Speaker 2: thing that was hard to ignore was the amount of 369 00:18:53,080 --> 00:18:56,879 Speaker 2: demand growth that happened last summer. So the previous demand 370 00:18:56,880 --> 00:19:01,720 Speaker 2: record are caught was seventy five gigawatts set in twenty nineteen, 371 00:19:01,880 --> 00:19:04,880 Speaker 2: and that that held until last summer, and it broke 372 00:19:04,920 --> 00:19:07,119 Speaker 2: the demand record close to a dozen times and reached 373 00:19:07,160 --> 00:19:10,600 Speaker 2: eighty gigawatts, So that's six gigawatts of peak demand growth. 374 00:19:10,640 --> 00:19:12,919 Speaker 2: Is quite rare in other parts of the US to 375 00:19:13,000 --> 00:19:16,560 Speaker 2: have so much load growth, so we wanted to try 376 00:19:16,600 --> 00:19:19,359 Speaker 2: and measure how much of it was the bitcoin that 377 00:19:19,480 --> 00:19:21,640 Speaker 2: was adding to this tremendous load growth. 378 00:19:21,920 --> 00:19:25,040 Speaker 1: So we do know that servers generally do pose an 379 00:19:25,080 --> 00:19:28,800 Speaker 1: opportunity for flexibility within an energy system, and I believe 380 00:19:28,880 --> 00:19:32,880 Speaker 1: that you also came across some really interesting examples of 381 00:19:32,920 --> 00:19:36,400 Speaker 1: where that has happened, specifically with bitcoin. Can you elaborate 382 00:19:36,440 --> 00:19:37,080 Speaker 1: on some of those. 383 00:19:37,480 --> 00:19:40,320 Speaker 2: Last July, there was another heat wave in Texas and 384 00:19:40,400 --> 00:19:43,960 Speaker 2: prices also exploded, and based on quotes and what we 385 00:19:44,240 --> 00:19:47,560 Speaker 2: modeled demand, we saw that around one hundred and fifty 386 00:19:47,760 --> 00:19:50,800 Speaker 2: dollars per megawatt, based on what the bitcoin price was 387 00:19:50,800 --> 00:19:53,560 Speaker 2: at at that time, was about the break even price 388 00:19:53,600 --> 00:19:57,040 Speaker 2: of bitcoin. So if anything above it, it made economic 389 00:19:57,200 --> 00:20:01,040 Speaker 2: sense for these minds to shut off. And that's broadly speaking, 390 00:20:01,119 --> 00:20:03,040 Speaker 2: a lot of these minds have different efficiencies. 391 00:20:03,320 --> 00:20:04,760 Speaker 1: Did many of them take advantage of it? 392 00:20:05,000 --> 00:20:05,200 Speaker 2: Yeah? 393 00:20:05,240 --> 00:20:08,280 Speaker 4: I mean I think they pretty universally took advantage of 394 00:20:08,320 --> 00:20:11,960 Speaker 4: it because either they have demand response agreements in place, 395 00:20:11,960 --> 00:20:14,480 Speaker 4: but if they're exposed to wholesale power prices, it makes 396 00:20:14,520 --> 00:20:17,399 Speaker 4: no sense for them to mine bitcoin at a loss. 397 00:20:17,600 --> 00:20:20,240 Speaker 4: And I suppose this kind of speaks to just why 398 00:20:20,280 --> 00:20:23,240 Speaker 4: this is interesting to me, even if I'm not interested 399 00:20:23,280 --> 00:20:25,679 Speaker 4: in bitcoin. Is one thing that makes bitcoin unique as 400 00:20:25,680 --> 00:20:28,600 Speaker 4: a load, and this is different from other servers, is 401 00:20:28,640 --> 00:20:32,640 Speaker 4: that you can switch it off instantly because effectively, bitcoin 402 00:20:32,720 --> 00:20:35,840 Speaker 4: miners they're trying to randomly guess the answer to a problem, 403 00:20:36,040 --> 00:20:38,920 Speaker 4: and periodically they'll hit on the answer and get rewarded 404 00:20:38,920 --> 00:20:41,440 Speaker 4: with some bitcoin and overtime. This averages out into quite 405 00:20:41,440 --> 00:20:43,359 Speaker 4: a sort of easy equation for them to say, how 406 00:20:43,440 --> 00:20:46,240 Speaker 4: much money do we make for every megawa hour we consume? 407 00:20:46,359 --> 00:20:48,520 Speaker 4: But what that means is when the price of power 408 00:20:48,520 --> 00:20:50,440 Speaker 4: gets too high that it's not worth it for them, 409 00:20:50,520 --> 00:20:53,240 Speaker 4: they can just switch off instantly. It's not like say 410 00:20:53,400 --> 00:20:56,480 Speaker 4: AI servers or any other kind of server where there's 411 00:20:56,560 --> 00:20:59,920 Speaker 4: ongoing operations that are happening that you can't just switch 412 00:21:00,119 --> 00:21:03,720 Speaker 4: computers off. With bitcoin mining, they really can just instantaneously 413 00:21:03,800 --> 00:21:06,640 Speaker 4: just pause their operations and just wait for the right 414 00:21:06,640 --> 00:21:08,760 Speaker 4: time to switch them on again. So it's kind of 415 00:21:09,000 --> 00:21:11,560 Speaker 4: the ultimate source of flexible demand. 416 00:21:11,840 --> 00:21:15,720 Speaker 2: There was one example of a bitcoin company, Riot Blockchain, 417 00:21:15,960 --> 00:21:18,040 Speaker 2: last July when there was heat waves. They made nine 418 00:21:18,080 --> 00:21:22,320 Speaker 2: point five million dollars from curtailing their operations and selling 419 00:21:22,320 --> 00:21:25,520 Speaker 2: electricity back to Urkot, which is more than the five 420 00:21:25,520 --> 00:21:27,879 Speaker 2: point six million that they sold that month. 421 00:21:28,119 --> 00:21:30,879 Speaker 1: So it's almost, well, not quite, but nearly double what 422 00:21:30,960 --> 00:21:34,000 Speaker 1: they would have made if they actually did their core business. 423 00:21:34,320 --> 00:21:38,160 Speaker 1: So speaking of a core business, that one might even 424 00:21:38,320 --> 00:21:41,080 Speaker 1: think is quite synonymous with Texas when we think about 425 00:21:41,080 --> 00:21:44,040 Speaker 1: the oil and gas industry. It's been there for some time, 426 00:21:44,280 --> 00:21:47,359 Speaker 1: and they also have some impact on energy consumption. Would 427 00:21:47,400 --> 00:21:50,160 Speaker 1: you be able to explain whether or not this hazard 428 00:21:50,240 --> 00:21:52,840 Speaker 1: maybe has not been impacting any of the price bikes. 429 00:21:53,240 --> 00:21:56,240 Speaker 2: Yeah, so oil and gas production out in the Permian, 430 00:21:56,320 --> 00:21:59,240 Speaker 2: which is in the far west region of Texas, has 431 00:21:59,240 --> 00:22:03,639 Speaker 2: tripled them in that region. However, as arcot as a whole, 432 00:22:03,960 --> 00:22:07,719 Speaker 2: it's quite low percentage of total energy demand. 433 00:22:08,000 --> 00:22:10,680 Speaker 1: So even though it's tripled in the Permian basin, it's actually, 434 00:22:11,040 --> 00:22:13,320 Speaker 1: just to break it down, not that big of a 435 00:22:13,359 --> 00:22:15,720 Speaker 1: deal because the overall demand for the total grid is 436 00:22:15,760 --> 00:22:16,360 Speaker 1: not a big deal. 437 00:22:16,480 --> 00:22:18,800 Speaker 2: Yeah, it's less than ten percent. I believe most of 438 00:22:18,840 --> 00:22:22,960 Speaker 2: the demand comes from the cities in central Texas. 439 00:22:23,280 --> 00:22:27,160 Speaker 1: Now, when do the hottest parts of the year really 440 00:22:27,240 --> 00:22:30,399 Speaker 1: hit Texas? Because you mentioned that this heat wave that 441 00:22:30,480 --> 00:22:34,080 Speaker 1: came through was in June, which really is what spurred 442 00:22:34,080 --> 00:22:37,600 Speaker 1: our conversation. But we're not through summer yet, So what 443 00:22:37,640 --> 00:22:40,160 Speaker 1: does August look like? Does it have a late summer 444 00:22:40,280 --> 00:22:42,320 Speaker 1: in Texas in it? Should this be something that we 445 00:22:42,320 --> 00:22:44,280 Speaker 1: should continue to be watching quite closely. 446 00:22:44,600 --> 00:22:47,560 Speaker 2: Yeah, I think this heat wave has been unrelenting. So 447 00:22:48,440 --> 00:22:51,879 Speaker 2: in mid June we saw extreme temperatures and Arcott issuing 448 00:22:51,880 --> 00:22:55,199 Speaker 2: a weather watch to customers, and in mid July they 449 00:22:55,240 --> 00:22:59,240 Speaker 2: also issued another weather watch for the extreme heat. August 450 00:22:59,280 --> 00:23:02,639 Speaker 2: has typically been when we've seen these really high power 451 00:23:02,680 --> 00:23:07,200 Speaker 2: price spikes. Last summer, August cool down compared to April 452 00:23:07,240 --> 00:23:10,240 Speaker 2: to July. So perhaps we could see that that trend 453 00:23:10,240 --> 00:23:13,640 Speaker 2: again of cooling, or we could see even higher temperatures 454 00:23:13,880 --> 00:23:15,560 Speaker 2: and prices hitting in August. 455 00:23:15,800 --> 00:23:18,480 Speaker 1: We'll definitely be watching the weather. And as we look 456 00:23:18,480 --> 00:23:21,639 Speaker 1: into the future, you know you'd noted that solar really 457 00:23:21,680 --> 00:23:24,480 Speaker 1: does occupy this very useful space in the way that 458 00:23:24,520 --> 00:23:27,640 Speaker 1: electricity is consumed in Texas. Do we forecast that there 459 00:23:27,680 --> 00:23:30,439 Speaker 1: will be additional solar broad online and that'll continue to 460 00:23:30,480 --> 00:23:33,480 Speaker 1: be a really popular solution for their grid. 461 00:23:33,720 --> 00:23:37,040 Speaker 2: Definitely, we see about four to five gigawatts of solar 462 00:23:37,080 --> 00:23:39,000 Speaker 2: coming online year over year. 463 00:23:39,400 --> 00:23:41,960 Speaker 1: So we've come to this section where I don't do 464 00:23:42,000 --> 00:23:44,320 Speaker 1: it on every show, but sometimes I ask some questions 465 00:23:44,320 --> 00:23:46,879 Speaker 1: that are watcher ignore because you guys are the experts, 466 00:23:46,920 --> 00:23:48,720 Speaker 1: and I want to know what things are you keeping 467 00:23:48,800 --> 00:23:51,000 Speaker 1: closer to the ground on and what sort of things 468 00:23:51,040 --> 00:23:54,040 Speaker 1: are you potentially ignoring for the time being and will 469 00:23:54,080 --> 00:23:56,320 Speaker 1: resurface in the future as they come up. So I've 470 00:23:56,320 --> 00:23:58,480 Speaker 1: got a couple of them for you. In the watcher 471 00:23:58,560 --> 00:24:02,000 Speaker 1: ignorer category. You had noted that it looks like solar 472 00:24:02,080 --> 00:24:05,080 Speaker 1: is going to be increasingly popular or continue to be 473 00:24:05,119 --> 00:24:06,960 Speaker 1: popular going forward. How about wind? 474 00:24:07,400 --> 00:24:10,360 Speaker 3: Ignore? Oh am, I just am I supposed to give 475 00:24:10,400 --> 00:24:11,760 Speaker 3: more than just saying that. I thought it was just 476 00:24:11,800 --> 00:24:12,520 Speaker 3: really I want to. 477 00:24:12,600 --> 00:24:15,280 Speaker 1: I like that though, that was so clear that you 478 00:24:15,320 --> 00:24:17,440 Speaker 1: didn't even hesitate for a second time. 479 00:24:19,680 --> 00:24:23,359 Speaker 4: I think that wind. There's already so much wind in Texas, 480 00:24:23,560 --> 00:24:25,800 Speaker 4: and so it will continue to be an important part 481 00:24:25,960 --> 00:24:29,080 Speaker 4: of the energy mix there. And sure there will continue 482 00:24:29,080 --> 00:24:32,240 Speaker 4: to be wind being developed, but it's just getting eclipsed 483 00:24:32,280 --> 00:24:34,399 Speaker 4: by the rate of which solar is being added. So 484 00:24:34,440 --> 00:24:36,520 Speaker 4: I know that we all associate, well we don't all, 485 00:24:36,560 --> 00:24:38,879 Speaker 4: but those of us who look at these things associate 486 00:24:38,920 --> 00:24:41,560 Speaker 4: Texas with wind. But I think it's going to be 487 00:24:41,600 --> 00:24:43,959 Speaker 4: more and more that the market is defined by solar, 488 00:24:44,160 --> 00:24:47,080 Speaker 4: kind of more similar to say California in that regard. 489 00:24:47,280 --> 00:24:50,160 Speaker 1: Okay, next, watch or ignore. It feels like the elephant 490 00:24:50,160 --> 00:24:51,879 Speaker 1: in the room to me, for what is an island 491 00:24:51,920 --> 00:24:53,480 Speaker 1: grid interconnectors. 492 00:24:53,840 --> 00:24:56,560 Speaker 4: Oh, it's hard to say watch or ignore because I 493 00:24:57,080 --> 00:25:00,359 Speaker 4: feel like what I would say watch because it it 494 00:25:00,440 --> 00:25:02,720 Speaker 4: would benefit so much from it. But I would also 495 00:25:02,760 --> 00:25:05,000 Speaker 4: say ignore because I'm not sure if I actually see 496 00:25:05,040 --> 00:25:08,000 Speaker 4: it happening given the politics around it. I don't know, Natalie, 497 00:25:08,119 --> 00:25:09,639 Speaker 4: you may know more on this than I do. 498 00:25:09,920 --> 00:25:12,400 Speaker 2: Yeah. I think when Better O'Rourke was running for governor, 499 00:25:12,440 --> 00:25:14,920 Speaker 2: that was one of his policies he wanted to do, 500 00:25:15,280 --> 00:25:18,000 Speaker 2: was to connect or cut to other grids. I'm on 501 00:25:18,040 --> 00:25:20,840 Speaker 2: a similar stance in which it would totally change ERCOT 502 00:25:20,920 --> 00:25:23,840 Speaker 2: if it connected to the rest of the country. But 503 00:25:24,000 --> 00:25:26,800 Speaker 2: I also don't see that happening anytime soon. 504 00:25:27,240 --> 00:25:29,800 Speaker 4: I think there's two factors at play. One is is 505 00:25:29,840 --> 00:25:33,040 Speaker 4: that at some point, if Texas is really interconnected to 506 00:25:33,080 --> 00:25:35,199 Speaker 4: the wider system more broadly than it would have to 507 00:25:35,400 --> 00:25:40,480 Speaker 4: come under the jurisdiction of FIRK, the Federal Energy Regulation Commission, 508 00:25:40,800 --> 00:25:44,560 Speaker 4: and politically Texas wants to remain independent in as many 509 00:25:44,560 --> 00:25:46,640 Speaker 4: ways as possible. So that's one thing, and the other 510 00:25:46,760 --> 00:25:49,479 Speaker 4: is just to generally, in the US, it's hard to 511 00:25:49,560 --> 00:25:53,280 Speaker 4: build transmission lines, even if you have all the political 512 00:25:53,320 --> 00:25:55,960 Speaker 4: will that you could possibly ask for there's so many 513 00:25:56,280 --> 00:26:00,320 Speaker 4: different barriers in sort of terms of regulation, politics, you face. 514 00:26:00,440 --> 00:26:02,679 Speaker 4: So it's just that's kind of like the cavalry that 515 00:26:02,800 --> 00:26:03,680 Speaker 4: is never going to come. 516 00:26:03,920 --> 00:26:06,440 Speaker 1: So interesting that you say that, Tom, because the show 517 00:26:06,440 --> 00:26:08,840 Speaker 1: that's going to follow up next week is actually going 518 00:26:08,920 --> 00:26:10,600 Speaker 1: to be about transmission lines. 519 00:26:10,840 --> 00:26:12,479 Speaker 3: Oh cool, so we will get to that. 520 00:26:12,520 --> 00:26:13,280 Speaker 1: Watch this space. 521 00:26:13,520 --> 00:26:14,800 Speaker 3: They might have a different perspective. 522 00:26:15,840 --> 00:26:18,640 Speaker 1: Well, we're not talking specifically about Arcott, but we will 523 00:26:18,680 --> 00:26:21,800 Speaker 1: talk about some of the challenges and really the necessity 524 00:26:22,000 --> 00:26:26,119 Speaker 1: of transmission lines for building out any energy infrastructure. Okay, 525 00:26:26,119 --> 00:26:28,920 Speaker 1: So last in the watch or ignore space, we talked 526 00:26:28,960 --> 00:26:31,880 Speaker 1: earlier about demand response in a very real way when 527 00:26:31,880 --> 00:26:35,439 Speaker 1: it comes to bitcoin and servers. Are you watching or 528 00:26:35,440 --> 00:26:39,760 Speaker 1: ignoring demand response and maybe other forms in other companies 529 00:26:40,040 --> 00:26:42,879 Speaker 1: A watch ooh, a simultaneous watch. 530 00:26:43,400 --> 00:26:47,080 Speaker 2: Yeah. An elastic demand is kind of the fundamental part 531 00:26:47,119 --> 00:26:49,840 Speaker 2: of power markets. So the fact that we're getting a 532 00:26:49,920 --> 00:26:53,119 Speaker 2: sizable amount of demand that is price sensitive is a 533 00:26:53,280 --> 00:26:56,800 Speaker 2: very interesting dynamic that has developed an Arcot. It's hard 534 00:26:56,840 --> 00:26:59,399 Speaker 2: to know how much more of these minds are going 535 00:26:59,440 --> 00:27:03,119 Speaker 2: to come online, especially with recent news of bitcoin, but 536 00:27:03,560 --> 00:27:08,320 Speaker 2: beyond bitcoin mining and just generally larger load being responsive 537 00:27:08,359 --> 00:27:11,000 Speaker 2: to the men and creating that flexibility in the grid 538 00:27:11,200 --> 00:27:15,320 Speaker 2: with renewables will be a very big thing to watch. 539 00:27:15,480 --> 00:27:17,800 Speaker 4: I mean, I co sign all of that, and I 540 00:27:17,840 --> 00:27:20,800 Speaker 4: think that it's not just interesting from a Texas or 541 00:27:20,840 --> 00:27:23,960 Speaker 4: Aircot point of view, and it's not even interesting necessarily 542 00:27:24,000 --> 00:27:26,760 Speaker 4: from a Bitcoin point of view. It's that because you 543 00:27:26,880 --> 00:27:30,760 Speaker 4: have this rapid infusion of flexible demand in air coop 544 00:27:30,920 --> 00:27:33,080 Speaker 4: whilst at the same time a lot of renewables are 545 00:27:33,080 --> 00:27:36,239 Speaker 4: being added, there are lessons that we can learn that 546 00:27:36,320 --> 00:27:39,040 Speaker 4: can be applied when we think about the future of 547 00:27:39,080 --> 00:27:42,359 Speaker 4: the energy transition, where it's not necessarily Bitcoin, but there 548 00:27:42,400 --> 00:27:45,159 Speaker 4: might be other forms of flexible demand. And it's just 549 00:27:45,200 --> 00:27:48,119 Speaker 4: the sort of the responsiveness, and as Natalie says, the 550 00:27:48,160 --> 00:27:51,240 Speaker 4: price in elasticity is, we see it in so much 551 00:27:51,359 --> 00:27:54,960 Speaker 4: more of a real time and responsive way in AERCOP 552 00:27:55,040 --> 00:27:57,600 Speaker 4: that it's a little bit like a science lab. So 553 00:27:57,840 --> 00:28:00,280 Speaker 4: you don't have to agree with urcot's market design or 554 00:28:00,320 --> 00:28:03,600 Speaker 4: Texas politics, but at least take an interest in what's 555 00:28:03,600 --> 00:28:05,919 Speaker 4: happening in ERKOP because I think that there are some 556 00:28:06,000 --> 00:28:09,480 Speaker 4: important lessons for other markets about how to go about 557 00:28:09,480 --> 00:28:12,200 Speaker 4: the energy transition that can be learned, and that flexible 558 00:28:12,240 --> 00:28:14,760 Speaker 4: demand that bitcoin is providing is a big part of 559 00:28:14,760 --> 00:28:15,320 Speaker 4: that lesson. 560 00:28:15,520 --> 00:28:17,720 Speaker 1: I think that's an excellent final thought to end on. 561 00:28:18,040 --> 00:28:20,240 Speaker 1: Natalie Tom, thank you very much for joining me on 562 00:28:20,280 --> 00:28:20,800 Speaker 1: the show today. 563 00:28:20,880 --> 00:28:21,840 Speaker 3: Thank you for having us. 564 00:28:22,000 --> 00:28:30,560 Speaker 2: Thank you so much, Jana. 565 00:28:31,960 --> 00:28:35,000 Speaker 1: Bloomberg n EF is a service provided by Bloomberg Finance 566 00:28:35,119 --> 00:28:38,600 Speaker 1: LP in its affiliates. 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