John Lennon once said, “Life is what happens when you’re busy making other plans.” I remembered this line today when I recalled the plans I was making for this year, and what actually happened.
For as long as I can remember, protecting the environment was my #1 value. At drama school, a friend affectionately teased me by christening me Daniel “loves trees more than people” Batten. In my teenage years and twenties, I was a regular on protest marches: against the confiscation of indigenous land, against Genetic Engineering, and against the logging of native forest to name a few. The most recent one I went on was 9 years ago against Deep Sea Oil Drilling off New Zealand’s coast.
I still remember the day a friend from Greenpeace, an organization I supported over 4 decades, rang me up to ask me to lead an action against one of McDonald’s environmental practices. Together with a flock of humans dressed as chickens, we stormed the McDonald’s HQ and I, dressed in Ronald McDonald-like regalia, announced my resignation. “Oh, and there is a slight chance you’ll be arrested” he mentioned at the end. I was CEO of a technology company I’d founded at the time. Without telling my board what I was planning, I said “yes.”
Slowly it dawned on me though, I was a better supporter of technology than I was a protestor. What if I used that skill to make a difference? That led me to create a ClimateTech VC fund.
It was an easy decision. I’d been investing in technology companies for 19 years, so I knew what to look for, what to avoid and how to optimize a founding team’s chance of success.
We invested in companies that not only made commercial sense but who we felt proud of. One company is on a mission to decarbonize the entire Zinc industry by 2045. Another has a goal to remove 50% of all CO2 emissions from the Greenhouse industry by 2030. The way they’re going, they’ll probably make it.
About the same time, a friend of mine started talking to me a lot more about Bitcoin. I felt conflicted. On one side, I could see the social good: how it helped build a world where wealth transfer from the poor to the rich via quantitative easing was no longer possible. But as an environmentalist, I’d heard the stories about its energy usage and was unconvinced if it did enough good to justify its carbon emissions.
When Greenpeace came out against Bitcoin – the inner conflict intensified. My Bitcoiner friend was telling me that it helped build out the renewable grid. My friends at Greenpeace were saying this was Greenwash propagated by greedy Bitcoin investors who would say anything to increase the user-adoption upon which their returns depended.
I realized I had to do my own research.
I didn’t know what I’d find, but I suspected the truth would lie somewhere in the middle.
For the first time in my life, I spent an extended period of time simply researching something I was curious about and wanted the answer to.
My research led me to read more about Climate Change, CO2 emissions, and methane emissions than I’d ever read. I’ll be honest: discovering the true enormity of the climate crisis and the task ahead of us was not easy reading. I forced myself to understand physics, energy, the jargon of the electrical grid, energy trading, and Bitcoin mining. I interviewed or listened to interviews with climate scientists, solar engineers, grid operators, analysts at utility companies, utility scale wind operators, solar installers, battery experts and onchain analysts.
Slowly but surely, a picture started to emerge from the haze. It was a consistent picture, consistently espoused by all the people I spoke to who had looked into it deeply.
The conclusion was this:
1. Bitcoin mining can be used in a way that is bad for the environment. Examples of this include the re-opening of a gas plant in NY State for the sole purpose of Bitcoin mining.
2. Bitcoin mining can also be used in a way that is good for the environment. Examples of this include the solar and wind operators I discovered who would not have got financing to build their plants had it not been for having a Bitcoin mining customer.
That looks like a neutral outcome, some arguments for and against. The outcome was anything but neutral.
Other things to know
I also found out
1. That the direction Bitcoin mining is heading is towards renewable energy
2. That the rate at which it is transitioning to renewable energy is faster than any other industry I’d seen (as a VC who sees around 50 cleantech pitches a year, we’d seen a whole stack!)
3. The current % of renewable energy use is also higher than any other industry
4. All the solar engineers, battery engineers, grid operators and utility analysts I spoke to, people who’d widely studied how you build out a renewable grid, said the same thing.
1. You cannot build a renewable grid without having flexible load customers
2. Bitcoin miners are the best flexible load customers they’ve seen
3. Bitcoin mining is increasingly using energy that would have otherwise been wasted (such as solar energy at midday or wind at midnight when people didn’t need it)
4. Bitcoin mining provided a path to retire all fossil fuel-based turbines needed as backups during “peak load” times
5. Bitcoin mining helped with maintaining the frequency and voltage regulation of the grid (which become progressively harder with every 10% of variable renewable energy you add)
6. Bitcoin mining could make power more affordable to consumers by reducing the curtailment fees that utilities otherwise had to pay to renewable operators for not taking their surplus power.
Bitcoin mining benefits
There were a host of other benefits too. But this would require some deeper analysis (and jargon) about how electrical grids work.
But really, the first two points say it all: grids built on variable renewable energy must have flexible customers who can adjust their usage according to generation supply. They must also be able to reduce their usage given minutes’ notice. Bitcoin miners are the only customers who provide this flexibility.
Or to put it even more bluntly: without Bitcoin mining, the renewable grid will simply not happen – it will remain an ideal: Grid operators and utilities will say they are “working towards it”.
So what problem with renewables does Bitcoin uniquely solve?
Grid operators’ #1 goal is to maintain the stability of the grid. Cost-effectiveness and renewable composition is important, but not as important as stability. That’s because when grids fail, people die and grid operators lose their jobs (as recently happened during the Texas 2021 Winter Blackouts). Even with battery technology, this stability becomes progressively harder to achieve when you base your grid on variable renewable energy.
While we must move away from fossil fuel plant, coal and gas did offer one advantage over renewables: you could increase or decrease the generation of a gas plant at will. Solar and Wind don’t have that flexibility. They are also highly unpredictable.
When you add inflexible and unpredictable generators such as solar and wind, unless you counterbalance this with flexible, predictable customers – the entire grid will become unstable because of either under-supply or oversupply of electricity and there will be a higher risk of blackouts.
Climate change factors
Ironically, as climate change bites, extreme weather events are becoming more common. This means that grid operators are faced with the Herculean task of trying to transition to a grid made up of variable renewable energy at a time when even the existing grid is becoming more unstable due to climate events.
Grid operators have investigated a number of other options: Hydrogen, batteries, pumped hydro, device control programs, and Demand response based on curtailing steel plants. None of them come anywhere close to the flexibility of Bitcoin miners. Even batteries are only a partial solution for reasons I cover in detail in my separate article
Bitcoin’s location-agnostic and time-of-day agnostic features turn out to make it the ideal way to remove most of the world’s atmospheric methane caused by human intervention too, but that’s another story.
Bitcoin and the environment: A summary
In summary: here are some quotes directly from some of the key players.
“Never in my wildest dreams would I have imagined a customer as ideal as Bitcoin miners” [Utility Scale Wind Operator]
“I started off researching batteries as a solution to the intermittency of solar. I soon realized that without another offtaker for surplus power, batteries were incomplete. After testing a number of possible offtakers, I realized the that best one by far was Bitcoin Mining.” [Sam Kivi, Solar Engineer]
“We can use that cryptocurrency to … find a home for more solar and more wind to come to our grid. “Then they reduce consumption when we need that power for other customers. So it’s a great balancing act.” [Brad Jones, Interim CEO, ERCOT (The Grid Operator for Texas)]
A big component of how we get [to our 2050 renewable grid goal] is new demand response strategies. And Bitcoin mining is different because you can reduce demand in minutes to the exact level you need with pinpoint precision. You just don’t see that level of flexibility or response in these legacy (demand response) programs. [lead analyst, major US Electrical Utility]
In the end…
So, there you have it. It wasn’t what I was expecting to find. I had to put aside everything I thought I knew about Bitcoin. The more I go through life, the more I realize that until you’ve looked deeply into something, you’re not in a position to judge it.
A deeper look at Bitcoin reveals a surprising truth. Bitcoiners sometimes despair that the mainstream media narrative does not take this deeper look. I would encourage these Bitcoiners to not be concerned. Every novel disruptive technology gets attacked because, well, it disrupts some people who do not want to be disrupted.
Meanwhile behind the scenes, Bitcoin is enabling one of the single most important transitions of a generation: the transition to the renewable grid. Sooner or later this truth will become so undeniable that Bitcoin detractors will be forced to choose a different attack vector. In the meantime, as an environmentalist, I could not be more delighted that we have Bitcoin in our world.
There is a phrase in the climate movement: “the perfect is the enemy of the good.” Solar isn’t perfect but it’s good. So is the case for Wind. For Bitcoin also, it’s in the same club: not perfect, but good. Bitcoin offers us a practical way to build out the renewable grid at a time we’re in a footrace against a fast-warming world.
About the author
Daniel Batten is a ClimateTech investor, author, ESG analyst and environmental campaigner who previously founded and led his own tech company which exited in 2019.