Nov 7, 2023

Bitcoin miner Marathon Digital has teamed up with Nodal Power for a 280 kilowatt pilot mining project in Utah that is using methane gas generated from landfill waste to power mining operations.

Video transcript

Bitcoin Miner Marathon digital has teamed up with Nadal power for a 280 kilowatt pilot mining project in Utah that is using methane gas generated from landfill waste to power mining operations. Joining us now to discuss is Marathon digital holdings. Ceo Fred Thiel. Welcome back to the show, Fred. Great to be here. All right. So this is uh a big move for marathon digital talk to us about how this works. So essentially what we're doing is taking methane that is emanating from a landfill. Think your trash basically as it rots in a landfill generates methane gas, landfills have an obligation to collect that gas generally, but only about 50% of landfills do that and do something to mitigate the methane. The other 50% of landfills just vent it into the air. Methane is 80 times more damaging to the environment than carbon dioxide. And so we believe that long term Bitcoin miners can become essentially energy negative, meaning that we consume energy that truly is wasted and we're not using energy off the grid, we're not using energy that is coming um and has been generated to power. Anything for consumers or industry, but rather we're consuming this type of bad energy. So we take methane gas coming from the landfill, convert it into electricity and use that electricity to power our miners. So Fred uh welcome back to, of course, the it's a great idea. Um And there obviously have been other uh examples of methane being harvested throughout the United States and all over the world really. But you guys are a for profit company. So what are the costs for you to actually go out and try to harvest in this, in this one case that, that uh you your most recent uh your most recent project, what are the costs? How much Bitcoin can you expect? And what kind of Riro I are we looking at here? So here's a great way to compare it. Imagine traditional Bitcoin mining operation, you're paying 3 to 4 cents for energy and then you have hosting operations cost on top of that. So let's say it's costing you 5 to 6 cents a kilowatt hour to mine Bitcoin. All things being equal with landfill, natural gas or as we call it LFG, you can essentially lower your electrical cost considerably. So you could get your all in cost down from five or six cents to maybe under four cents. So there's a huge ro I for us because it lowers our cost to mine Bitcoin. The other advantage is that methane doesn't get curtailed like energy does, for example, in Texas when miners are being compliant with the electrical grid and they shut down production to provide more electricity to the grid. With methane landfill gas. It's coming out of the ground all the time. So you can mine 2473, 65 very high up time. And if the cost is, you know, four cents or less, then we've just lowered our cost to mine Bitcoin by in this example, 30%. That's a considerable ro I now what it, so a couple of things here. First of all, what you have to have some costs, right? You have to set up the facilities. I assume it's not already in place. You're, you're paying to build AAA way to mine this. How much is that costing? How does that get factored into all this? And how long is it expected to last? So the duration of the gas coming out of the landfill could be 2030 years. Uh It all depends if the landfill is active or not active, meaning they're continuing to refill, add more trash to it, but definitely longer than the life of the miners. We're deploying, you know, the average life of a mining center, data center is from a rig perspective. Five years before you have to swap out the rigs because they get old and they're not as efficient as the newer rigs are. And the infrastructure may last 1015 years. In this case, it's pretty similar. The infrastructure will last 15 to 20 years. Um You're generating power off of the methane using uh a special type of generator in a traditional Bitcoin data center. You're having to buy substation equipment, power transformers, all of the similar types of equipment from a cost perspective as you do to generate electricity off the methane. So the capital expenditure is not that dissimilar. The challenge is you have to have access to the methane. So you have to have relationships with the landfills. The other advantage you get is when you mitigate methane in some areas, you're able to receive essentially credits for that mitigation, you're generating carbon credits to keep it simple. Uh Rins and rex as they're called, those can be sold and that subsidizes your cost. So in this case, in the, in the Utah, it is Utah, right? Uh What, what's the ro I on this E expected given Bitcoin's price around, let's say $34,000. Uh Yeah, I'm not gonna go into exact numbers because it you have to compare it to something else. But essentially we're looking at increasing the profitability of mining at this site by upwards of 20 to 25% compared to any one of our typical data centers. Now, granted this is a pilot doing this at scale has yet to be done. But our goal is to build out more and more of these sites. One of the specialties we've developed is the ability to do small sites uh with low manpower requirements, which gives us access to many more sources of energy like this than just traditional data centers. II, I guess my question is, are, are you covering, let's say loan costs, let's say I'll throw a hurdle rate out of 7 to 10%. Uh Assuming that's a borrowing cost you guys have. II, I don't know. I'm just throwing that out there. Are you able to, are you able to cover that? And then? Oh, absolutely. Yeah. Our, our typical cost of capital that we use for evaluating any project, the hurdle rate we internally use is about 22%. And so you're, you're more than 22 you're doing better than 22%. Yeah. Ok. Fred. How are you going to determine success here? What's gonna make this pilot a success for you and see marathon, build up more uh sites like this? So up time obviously is the gas flow consistent. Uh What are the uh maintenance requirements on the equipment? Are they different? So you have generators here compared to having substations and transformers in a traditional data center. So it, it's really a pilot to see what the operating um expenses are. And if they compare and if they're better and then really for us to identify how we can do this better. Um As an example, when we did our first site in the UAE, we did a one megawatt pilot where we really fine tuned what we were doing before we built out the full 250 megawatts there. Same thing here. We're doing a small pilot. We're experimenting over time. We'll likely try different generators. We'll try different ways of cleaning the methane, et cetera to make sure that we really have it dialed in before we expand and do this at scale. But in the US, there are hundreds of land landfills that are viable sites for this type of mining internationally. There are huge landfills and we've been in some early stage discussions with sovereigns in countries where they have huge landfills where they're not doing any mitigation. We're using this type of system could help them comply much more with environmental concerns and generate extra revenues for them as well as generating very low cost Bitcoin for us. So of course, the, the obvious question here is why haven't they used uh methane as a way to generate electricity before you guys came along if it's so if it's so beneficial? Uh o obviously, you, you're a big electric goal, you, you're a big electric consumer but so are cities and why haven't power companies gone into uh waste sites and said, hey, look, you know what this is, this is a way for us to uh to, to make some money and, and, and deal with the towns? Why, what, how are you guys able to do this or why are you guys all of a sudden coming in. Why haven't the cities done it before? So, as I said earlier, about 50% of the landfills are viable for this type of operation. The other 50% currently do generate electricity because they're connected to transmission lines. They have enough gas and they're doing it at an industrial level. So if you look at that 50% that currently are using the gas for something productive, it's either being used to generate electricity which is then being injected into the grid or it's being refined and injected into natural gas pipelines. And so we're using the 50% of landfill gas that is stranded, meaning they're too far from a transmission line, they're too far from a natural gas line. And it's just impractical for them to refine the gas for natural gas um or to generate electricity at scale. Again, one of our core competencies nowadays is that we can do very small scale Bitcoin mining sites profitably because of the technology we've deployed in our mining capabilities. So we believe going forward there's going to be a huge, not just in landfills, but with biogas, which is another thing. Look at all the agricultural waste that comes out of food production, dairy industry, uh corn production, et cetera, there's huge amounts of raw material that is organic, that will otherwise become methane producing material that if you can convert that into energy, essentially could create energy negative Bitcoin, which is something we're very focused on. So, so, so in other words, these are, these are uh sites that basically they're, they're, they're long forgotten, they're forgotten by the energy industry. Is that what you're trying to say? Impractical? They're too small, too far away. Um And, or just produce too little. Are you exploring any other sources of renewable energy? And why, why if so, why is this better? So we were exploring a wide variety of energy sources. So in some cases, you'll see us mining off of wind energy, which we do in Texas and North Dakota today. Uh You'll start seeing us mining off of hydroelectric dams. There's a huge amount of stranded hydroelectric capacity in the world today, more so internationally than in the US. There's a huge amount of biomass, as I mentioned, you know, landfill is one type but um you have biogas coming off of all sorts of agricultural food processes and um dairies, et cetera, you know, a lot of the methane produced today comes from manure. Uh you know, dirty word, but it's true. And if you could take that manure, capture it and essentially um use that methane to produce energy, which some people do actually in the world today already. Um you could generate a huge amount of electricity and again making Bitcoin mining energy negative. That's one of our goals. We also, if you're dealing with manure, have you thought of, of, of operating out of Washington DC? Well, that's swamp gas as they say. But uh yes, that would be an option. Had to get a nice Lawrence joke in there at the end of this spread. Thanks so much for joining us. Always a pleasure having you on. You're very welcome. That was Marathon Digital Holding, Ceo Fred T.

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