Episode 168 | Crypto Complement | Digital Power Optimization
In Episode 136 we explored the potential to use computing power to soak up excess power from the grid. My guest called these types of operations “batchable applications.”
My guest today has a similar solution, except he wants the power producers themselves to own these data centers, rather than simply be a customer.
Andrew Webber, is co-founder and CEO of Digital Power Optimization (DPO), a New York-based company specializing in Crypto Mining as a Service (CMaaS). DPO claims they invented CMaaS, which is also incorporated batchable (or as he calls it, “flexible computing”) applications to help power producers reduce a surplus of power on the grid.
“If you own it, you have all the economic upside,” says Andrew, “but you also have the operating flexibility in deciding when and how these assets operate in a coordinated fashion.”
Crypto mining works by placing several computers together like a data center. Crypto requires these computers to update the latest transactions. Every ten minutes, a new chain of blocks is added. If the miners helped add the new blocks, the blockchain software automatically gives cryptocurrency to the miner.
You get the “reward from the software itself,” according to Andrew.
I was fascinated by the idea that any utility would want to actually own an operation like this. Yes, it could be lucrative, and solve the energy curtailment issue. Andrew says he recommends that power producers immediately sell their mined crypto, so that there’s no risk of a crypto downturn. But utilities are historically risk-averse. Many are in regulated markets where their monopoly in a region is closely overseen by state-level agencies. How easy can it be to sell a business proposition like this?
“Extremely difficult…but the opportunity is so great that we don’t mind,” says Andrew. He adds that utilities aren’t the only power producers they count on for clientele. Many private equity companies own power plants or solar farms as well, which aren’t under such harsh regulatory oversight. Andrew also says he prefers these CMaaS operations to be located “behind-the-meter,” so that the power can be consumed by the plant itself rather than out on the open market.
“It’s getting easier and easier for energy companies to do this, where they don’t feel it’s quite so unfamiliar and quite so strange,” he says.
I was also curious about the divergent market incentives this could create. Say crypto goes up an astronomical amount, at the same time there’s a weather event creating a shortage of power. Do power producers keep mining crypto, or sell power to the grid? Customers could make $70-$150 a megawatt for bitcoin mining. That’s competitive with market rates for power.
“This isn’t meant as a primary offtaker for an asset,” says Andrew. “It’s meant as something that can tuck in around the edges, where it’s most needed.”
Cryptomining is just the beginning, according to Andrew. AI computing, batch computing and “zero-knowledge proofs” are just some of the services that could work with power production.
“There are a lot of types of computing that are about to come online over the next decade. Bitcoin mining is not the only game in town.”
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