{ "episodeId": "SLP609", "speakers": { "stephan": { "name": "Stephan Livera", "role": "host", "tag": "STEPHAN" }, "kenji_tateiwa": { "name": "Kenji Tateiwa", "role": "guest", "tag": "KENJI" } }, "segments": [ { "speaker": "stephan", "time": "00:11", "start": 11.11, "text": "Hi everyone, and welcome back to Stephan Livera podcast, brought to you by GetBolt. This is for American listeners, the best place to buy, save, and store Bitcoin using your own two of three vault. So American listeners, you can find that over at GetBolt dot io. So joining me on the show today is Kenji Tateiwa. He is the CEO of Agile Energy. GX in Japan, a subsidiary of Tapco. So, Kenji, I know you're doing some interesting things, but first of all, welcome to the show." }, { "speaker": "kenji_tateiwa", "time": "00:37", "start": 37.43, "text": "Thanks for having me, Stefan." }, { "speaker": "stephan", "time": "00:40", "start": 39.93, "text": "So, Kenji, I know you're, excited about, Bitcoin and energy, and I'm sure there's lots of things we can get into here, but, let's start with a little bit of your background professionally." }, { "speaker": "kenji_tateiwa", "time": "00:52", "start": 52.12, "text": "Yes, so I did my bachelor's and master's in nuclear engineering in Japan, joined Tokyo Electric Power Company, or TEPCO, in nineteen ninety-six, and I started my career as a nuclear engineer. And in my early career, I was designing next-generation nuclear reactors, collaborating with, companies such as General Electric, Toshiba, and Hitachi. but then I, I decided to pursue my MBA, got my MBA from Stanford in two thousand and four, and I made an internal career switch within TEPCO and started I got to work in the international division of TEPCO, where I worked on an Australian coal power project. But my, big career objective was to someday start TEPCO's international nuclear business, and that opportunity arrived when NRG Energy in the US, decided to, to build two nuclear reactors in Texas, using a Japanese, design nuclear reactor, and NRG asked TEPCO to help their, nuclear new build project, project in Texas, and I spearheaded That, project. but, unfortunately, the twenty eleven, March, eleventh twenty eleven, accident, Fukushima nuclear accident happened, and I was, in the thick of that, collaborating with international organizations to mitigate the impact. And then I, I- Volunteered to work in the Washington, DC office of Tepco from September 2011, and the following four years I was, disseminating lessons learned from the Fukushima nuclear accident, to the international communi-community. And then I returned to Tokyo in 2015, and since then I've been working on various other projects, including decommissioning of Fukushima Daiichi nuclear, power plant, also, working with Hitachi for the United Kingdom nuclear new build project. But then in 2018, there was this Tepco in-house, training program for future executives to come up with a new business, plan, which will allow Tepco to," }, { "speaker": "kenji_tateiwa", "time": "02:54", "start": 173.66, "text": "to serve the Fukushima community after the disaster, and in order to do so, TEPCO had to come up with, with a, a large, profitable business, and obviously it's not easy to come up with, but, we were, tasked to come up with an idea in this training program, and that's when I came up with this idea of using, wasted Cretele renewable energy using a flexible demand, Including Bitcoin mining. And so I proposed this business plan in twenty eighteen to the Teppo executives, and initially nobody understood what I was saying. nobody understood how Bitcoin mining could be, a good business for Teppo. in twenty eighteen, actually, it was, immediately after the bust of the Bitcoin bubble, and, people were saying, \"In Japan, Bitcoin was a fad, it might be a Ponzi scheme, and also Bitcoin mining.\" being a waste of electricity, but I, persisted in, telling the Tepco executives it actually, actually made sense for Tepco as an electric utility to use a flexible demand as coin mining, and it took me four years, but, in twenty, twenty twenty, no, actually twenty twenty-two, I was able to, Established as a energy X as an in-house venture of Tokyo Electric Power Company." }, { "speaker": "stephan", "time": "04:17", "start": 256.66, "text": "Great. And just for listeners who aren't familiar, could you just explain a little bit about TEPCO? As I understand, it's about fifty-six percent government owned. It's a big company. It's worth about one point one trillion JPY or about seven point five billion in USD terms as in the overarching TEPCO company. And, they do energy for, I guess, the region of Tokyo, is it Kanto? Can you explain a little bit?" }, { "speaker": "kenji_tateiwa", "time": "04:39", "start": 279.16, "text": "Yes, yeah. So, TEPCO used-- or, or in Japan, there used to be, regional monopoly utilities vertically integrated, and TEPCO was the largest, utility in Japan, providing, about one third of the total electric, supply in Japan. And then, the u-- the in-- electric, power sector was, deregulated, and TEPCO was split into the generation, distribution, transmission, and retail, but there's- Still, the Tepco, Holdings company, that owns the, the, the generation, transmission, and retail part. And Azure Energy, we are part of IEX, we're a subsidiary of Tepco Power Grid, which is the transmission and distribution arm of, Tepco Holdings." }, { "speaker": "stephan", "time": "05:29", "start": 329.28, "text": "Great. okay, yeah, and so, I guess for people who aren't as familiar, if you could just kind of explain a little bit about the difference there, the generation, distribution, you know, for people who aren't as familiar with energy markets like you are, I'm sure." }, { "speaker": "kenji_tateiwa", "time": "05:41", "start": 341.22, "text": "Okay, yeah. So, electricity, first we have to generate electricity, using various, power generators, including, coal-fired power plants, gas-fired power plants, nuclear power plants, and then, hydro, and then, recently, solar power, wind power, and so forth. And then the electricity has to be, sent to the consumers using transmission lines, distribution lines, and in between there are transformers, to adjust the voltage. And then there's- The retail part where, companies sell the electricity to consumers. So there's this generation, transmission and distribution, and then the retail part, like, like three large buckets of the, electric, industry." }, { "speaker": "stephan", "time": "06:25", "start": 385.21, "text": "Great. And, you know, I think some listeners would probably wanna hear a little bit from you about your involvement in Fukushima and what, what were you doing at that time, just to explain a bit from a first-hand perspective." }, { "speaker": "kenji_tateiwa", "time": "06:38", "start": 397.55, "text": "Yeah, so, when, when, March 11th, 2011 happened, I was in downtown Tokyo, just got off a metro, walking in the underground corridor when the ground started to shake violently. And then, so all trans- transmis- transportation system came to a screeching halt. I had to walk back to the Tokyo headquarters. a-at that time, actually, I was working on the, United States nuclear new build project, but obviously, that, that was And I was, first asked to, translate all the press releases that TEPCO was sending out with regard to what was unfolding at Fukushima Daiichi, because I happened to be about the only TEPCO employee who understood the technical details of a nuclear severe accident and was able to translate that into, English, so I put out an all-nighter translating. And then I was asked by the TEPCO management to, s- accompany the International Atomic Energy Agency or the IAEA delegation, To the Fukushima Daiichi nuclear power station. IAEA is the global authority in nuclear, and they had to see for themselves what was happening on site. but it was three weeks, weeks into the accident, still radioactive steam spewing out from the damaged nuclear reactor building, so no professional interpreter was there going to the site. So therefore, I was asked to serve as both interpreter and technical guide for the IAEA delegation. So I walked into the Fukushima Daiichi nuclear power station early April twenty eleven, with the IAEA IAEA delegation putting on full face respirator and saw the surreal imagery of the damaged, nuclear reactor buildings. And then, in the following, six months, I primarily, primarily worked with the international community, including the IAEA, and also, worked closely with the United States, nuclear industry team, to, cope with the situation to mitigate, the impact from the accident." }, { "speaker": "stephan", "time": "08:33", "start": 512.97, "text": "Yeah, and I, I presume obviously your career has been in nuclear energy. Did you notice that this, let's say, in terms of public perception, that it sort of scared people away from nuclear energy, or can you explain a little bit about how the perception shifted?" }, { "speaker": "kenji_tateiwa", "time": "08:50", "start": 530.01, "text": "Yeah, so before, March 11, 2011, the Japanese, government, had a policy of, providing electricity, in Japan, fifty percent, by nuclear. But obviously after the accident, the, the public perception obviously went down. still people are, kind of, scared of nuclear, technology. but at the same time, Japan is scarce, is scarce from, nat-natural resources, energy resources, and, people understand that we need nuclear energy, but still, understand the downside of it. So it-it's a very difficult balancing act that has to happen in Japan." }, { "speaker": "stephan", "time": "09:34", "start": 574.09, "text": "Great, okay, yeah, and maybe we can get to the nuclear stuff later, but let's focus on what you're doing with Agile Energy X, and, you know, what your, if you could start with just an overview, what is Agile Energy X and why did you start this?" }, { "speaker": "kenji_tateiwa", "time": "09:47", "start": 587.39, "text": "Yes, yeah, thanks. so, back in twenty eighteen, I in this Taproot in-house, a training program, I came up with this idea of using Bitcoin mining to, make most out of the wasted renewable energy, that was had-- that started to happen in twenty eighteen, primarily, solar power, because the gov-- Japanese government was pushing for, more renewable energy, because, nuclear power wasn't available and, Japan had to go, achieve Carbon neutrality, so more renewable meant more variable renewable and primarily solar in Japan, and because of the, supply and demand gap, in southern part of Japan, in the Kyushu Island, curtailment happened, and so there was this, increasing amount of wasted renewable energy, and I thought, how could we, monetize, or make the most out of this, wasted renewable energy? And I didn't know about Bitcoin mining, I was I wasn't really interested in Bitcoin, but I heard that, Bitcoin mining or Bitcoin, used this power guzzler Bitcoin mining which was very bad for the environment. That's what I first heard. But I then thought maybe it's a power guzzler, but we could use it in a good way because we have wasted renewable energy. So I, I came, combined these two together and then, before, it took me four years before I was, allowed to set up as a energy- But in the meantime, two years to convince the Tepco management to first, have me work on this concept, a-and let me do it, as a business, because, back in twenty eighteen, I was working on nuclear stuff. so the first two years, I was doing my day-to-day nuclear job while, working on kind of conceptualizing, the business that led to Azor Energy X. Then, and then from twenty twenty, I started to work in Tepco Power Grid. The distribution in our transmission arm of Tepco and started to, initiated several proof of concepts, which led to Azure Energy X's, proof of concept using Bitcoin mining, to, leverage wasted renewable energy. And then, twenty twenty-two, August twenty twenty-two, I was allowed to set up, Azure Energy X with a task of two, primary business, schemes. One is to use curtailed renewable energy or wasted renewable energy. The other is to solve the grid congestion issue, that was, increasingly, becoming an issue in Japan. like in the greater Tokyo area, there are many solar resources, but the, transmission and distribution systems, has a limit of how much electricity that could be, pushed through the grid, and there's a, long period of time before renewable energy could be connected to the grid, and even, After being connected to the grid, or, or in order to be connected to the grid, Tepco Peregrine had to upgrade the grid system, installing additional transformers or additional distribution lines, which was very costly and took time, and all the costs had to be passed on to the ratepayers. And so by using Bitcoin mining as a flexible demand near the source of renewable power, we, could, reduce the cost of, upgrading the grid, which will lead to Lower cost for the repeaters. So those two are using, critical energy and also solving the grid congestion issues, these are the, will be the, are the primary, revenue sources, for Tap, Azure Energy X." }, { "speaker": "stephan", "time": "13:32", "start": 811.76, "text": "Right. And can you give us an idea of the rough size of Agile Energy X in terms of, energy, you know, production and maybe staff, just to give a, just for people to get a rough idea?" }, { "speaker": "kenji_tateiwa", "time": "13:45", "start": 825.01, "text": "Yes. So we're, we're still at a tiny- company, you know, there are only five staff including myself, and the Bitcoin miners that we have is, it's very tiny, it's just a, still a proof of concept stage, but there's a, a big, upside and we're getting a lot of traction and, a lot of ex-um, expectancy, from, both, Tapco inside and outside of Tapco." }, { "speaker": "stephan", "time": "14:10", "start": 849.65, "text": "Yeah. And so I'm curious, what was the-- your part of your journey, I guess, you had to, let's say, make that business case internally, why should we do this? Can you explain for, listeners what, what that process was like? Because I'm sure at the start it was very no, and then over time, obviously, you had to convince them somehow. So could you explain a little bit of that? I think that would be interesting for listeners. Yeah," }, { "speaker": "kenji_tateiwa", "time": "14:31", "start": 871.4, "text": "yeah, yeah, it, it was very challenging. I, I think, Convincing the Tapco management because, the purpose wasn't to make money from Bitcoin, the purpose was to solve the energy issue and Tapco was, struggling to add more renewable energy because of, curtailment and also grid congestion, and it, it's gonna be a bigger issue in the future because, if Japan were to achieve carbon neutrality, there needs to be more renewable and most of the renewable are var- variable renewable energy, and, Tapco didn't Not have, like a panacea to, solve those issues, curtailment and grid congestion. And Bitcoin mining, although it was a foreign concept for the Tepco management, I was able to convince them, I didn't, I, I actually didn't orange peel them, it wasn't orange peeling, it was telling them there is this, new technology that is very flexible. Actually, I think it's one of the most flexible demand, that- has ever exis-existed, and they didn't know about it, and when I, told them and then showed them, the Bitcoin miners, like the real stuff, they- started to understand, it made sense to, use this kind of flexible demand and, set up a Taproot subsidiary to actually implement the idea." }, { "speaker": "stephan", "time": "16:01", "start": 961.44, "text": "I see, yeah. So just to be clear, it's like, it's not that they were ideologically coming to decide that they wanted to hodl Bitcoin, nothing like that. This is more about the strict Business applications of Bitcoin mining. Now, we should talk about some of these, Kurt Alman, and, grid congestion, as you said. So, here's my simple understanding, you tell me if I'm getting it wrong, right? So my understanding is In electricity grids, you have to keep things balanced, and so curtailment is when there's a deliberate reduction in the output below what could have been produced in order to keep that energy supply and demand balance because of the transmission constraints. And so My understanding then is what we have seen in different places around the world, there are sometimes renewable energy sources where it allows that company to-" }, { "speaker": "stephan", "time": "16:52", "start": 1011.71, "text": "use the energy, production, to go into Bitcoin mining instead of actually curtailing. So can you just explain a bit for that? Have I, have I got that right or what did I get wrong there?" }, { "speaker": "kenji_tateiwa", "time": "17:03", "start": 1022.6, "text": "Oh, yeah, no, you, you got it right. so, first, curtailment happens, because as you mentioned, electricity has to be balanced, supply and demand has to be balanced all the time. Otherwise, if, if there's too much supply, the frequency of the grid, goes Then, if it, goes above a certain level, there'll be a massive blackout, and, and electricity has to be shut down. so if rather than shutting down the, the, the generation when there's oversupply, Bitcoin mining will soak up the additional, supply, so, so that, that, that's, some, some, countries are starting to use Bitcoin mining, to solve the, curtailment issue, as you just mentioned." }, { "speaker": "stephan", "time": "17:49", "start": 1069.34, "text": "Yeah. And so then, so that's the containment side of it, and then there's the grid congestion aspect. So could you just explain a bit what is grid congestion, how does it happen, and then how is Bitcoin mining helping here?" }, { "speaker": "kenji_tateiwa", "time": "18:02", "start": 1081.95, "text": "Yes. So grid congestion, it happens, because the grid system, transmission lines and distribution lines. Transmission lines is high voltage, distribution lines low voltage. In either case, if you shove in too much renewable energy or any kind of electricity Electricity, where the supply is, and you have to send electricity to the demand, and in between you have, parallel lines, transmission lines or distribution lines, and there's a limit of how much electricity can be sent through the grid. if there's, if too much electricity is sent, the grid or the parallel lines are over-- overheat. so in order to send more electricity, the grid has to be, upgraded, like more parallel lines or Larger tran- transformers, and it's costly and it takes time. So, but what, what's happening in Japan, the issue is because of the, re- variability of renewable power, The congestion doesn't happen all the time, it only happens seasonally and during a relatively short period of time, and in order to accommodate with a short period of over, Over supply or a congestion happening, the additional, investment for the grid upgrade is, is suboptimal because, the up, the upgraded grid It's used only like, a hundred hours out of the eight thousand seven hundred, forty hours per, out of the year. so rather than upgrading the entire grid, if you have Bitcoin mining as a flexible demand near the source and absorbing the excess, electricity that would have necessitated the upgrade, it would lead to, not having to invest in like kind of wasteful New, new, facilities." }, { "speaker": "stephan", "time": "20:07", "start": 1207.23, "text": "The lead sponsor of this show is Bold, the best place to buy, sell, and save Bitcoin. 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This show brought to you by CoinKite dot com, the creator Creators of the best Bitcoin hardware security devices such as the Coldcard Mark IV and the new Coldcard Q. Now, we use Bitcoin hardware security devices to keep our keys offline, our private keys offline. Now, the way these work is you can do that setup, write down your twelve or twenty-four words on those, the seed word cards, and keep that secure. Now, you can use this device to interact with the Bitcoin network using software such as Sparrow Wallet, Electrum, or Bep20 Desktop. Or Nunchuk as a few examples. Now, you have a range of security features that you can use with these devices, such as passphrase, or you can use seed x or, or my favorite is multi-signature. Now, if you're starting in a basic way, just start with the device and the USB-C cable, plug it directly to the computer and use it that way, and then later improve your setup. But I believe these devices are great at helping secure your coins, especially as you start to migrate up into multi-signature security. But Don't be disheartened or don't be, scared away. They are accessible, and I think you actually do learn about Bitcoin in the process. So to get yours, go to coinkite dot com, use code Livera to get a discount on your cold card. And now, back to the show. I see. Yeah. And so I've heard, again, I'm not an expert, so you tell me, but I've heard this idea of like a peak load problem, and I guess that's kind of what this is getting at, this idea that if you've got wind" }, { "speaker": "stephan", "time": "22:34", "start": 1354.27, "text": "Grid. And so because of that, you would otherwise have to build a lot more, transmission, capacity to help distribute that electricity, that energy, out to the customers, whether that's retail customers or industrial and commercial customers. And so that's the whole point here is this idea that when this extra energy comes, it can be sent into Bitcoin mining instead of having to be sent across the grid, which then saves, let's say, the build out cost of the grid. Is that, have I got it right there? That's correct. Yes. Yeah. Great, okay. And so, I guess that comes into-- Now, I was, I was looking at some of the documents you sent me. There's the megawatt to megahash project, so I guess this is obviously related. So can you just explain a bit about the megawatt to megahash project?" }, { "speaker": "kenji_tateiwa", "time": "23:18", "start": 1398.18, "text": "Yeah, yes. So, when, when I proposed this concept using Bitcoin mining, to, to make most of the, wasted curtailed renewable energy, I, I came up with this, term megawatt to Converting electricity into digital value, specifically hash, I called it megawatt two mega hash." }, { "speaker": "stephan", "time": "23:42", "start": 1421.92, "text": "Great. And so, from the, well, actually, one other point, I think you've made this as well in, maybe in some of your press releases or in your slides, you talk about this idea of why Bitcoin is unique as an energy buyer. So can you explain for us why is Bitcoin unique as an energy buyer?" }, { "speaker": "kenji_tateiwa", "time": "24:01", "start": 1441.09, "text": "Yes. So, it, it is, unique, because it- It's flexible, in, in various ways. one is time agnostic and the other is, location agnostic. Time agnostic, Bitcoin mining can be turned on and turned off, b-because, it's an interruptible, calculation that's happening, connecting, to the Bitcoin network. You don't have to continue to run the calculation for whatever hours, i-i-it's interruptible because each hash, calculation, it, it- It's a complete, calculation, it could be done. the other is, location agnostic, it could be Bitcoin mining, can be, located anywhere as long as you have internet connection and power, and the internet connection, it doesn't have to have, low latency, i-i-and, and the bandwidth doesn't have to be, very wide, so it's, location agnostic. The other is, the flexibility of- In terms of scaling, Bitcoin mining, the smallest unit will be one miner like one kilowatt or several kilowatts, and if you have to, Absorb like, hundreds of megawatts, you just, line up as many Bitcoin miners as you, wish, need, and it, it could be containerized and it could be scaled up and scaled down, in a flexible manner." }, { "speaker": "stephan", "time": "25:30", "start": 1529.59, "text": "Yeah. Okay, so summarizing, it's time-agnostic, location-agnostic, it's low bandwidth in terms of bandwidth internet requirements, and the scaling aspect that you can easily scale it up and down. so I'm curious, how does Bitcoin mining then compare with, you know, what people are saying now is, you know, AI data centers are super popular now. I guess my understanding is the way you would explain or we would explain this is that Bitcoin actually is more Flexible in that, you, you know, with AI data centers, you can't just like turn it off because maybe it's doing some kind of processing, whereas with Bitcoin, you can turn it off and on." }, { "speaker": "kenji_tateiwa", "time": "26:05", "start": 1565.21, "text": "That, that's right, yeah. So I think in the, in terms of flexibility, Bitcoin mining is the most flexible, but at the same time, like, I, I haven't orange spilled the tap commencement, and if AI data centers can solve the energy issues, we're open to it. However, because of the flexibility, I, at this mo- at least at this moment, Bitcoin mine-mining is more suited to solve the energy issue. But if there's like, AI data centers that could be turned on and off, and it's, time-agnostic, location-agnostic, we're open to, using, such compu- computing technologies as well." }, { "speaker": "stephan", "time": "26:48", "start": 1607.64, "text": "Yeah. And so here I'm thinking of the returns from that. So as an example, and of course, it's probably cyclical, right? Just Bitcoin is cyclical, but also AI is probably cyclical and it's going through a huge hype right now, as I'm, as, as you know, you and most listeners are aware. So I'm curious, the question comes to my mind of Who's gonna pay more, right? Like right now, it might be that AI data center loads actually do pay a lot, and so maybe even if it's not as flexible as Bitcoin, maybe there are times where it makes sense, right? We've seen that with some large Bitcoin mining companies saying, \"Yeah, we're gonna also do AI and data center stuff for them, but also do Bitcoin.\" So I'm curious where you see that." }, { "speaker": "kenji_tateiwa", "time": "27:26", "start": 1645.97, "text": "Yeah, so, it, it is cyclical, and I'm not saying Bitcoin mining i-is the, the right solution all the time. The aspect that I, currently believe Bitcoin mining is better at this moment is because in order to solve the energy issue, we are trying to, combine two business models, as I mentioned, the curtailment and grid congestion. And if we use Bitcoin miners, first we will use high-end Bitcoin miners, to solve the curtailment issue. Try to, run the miner, at a high capacity factor as possible, and, in a, in a few years, that state-of-the-art Bitcoin miner will have relatively lower profitability, but then it could be used to solve the grid congestion issue because grid congestion, the most important aspect is to be able to soak up the, additional electricity that cannot be sent, to the grid that causes the congestion. So even the miner isn't profitable from, the, the Bitcoin, revenue, if it can still operate and consume electricity, it's useful, to be, to optimize the grid. So there, there's a longer life, useful life for a Bitcoin miner, as long as, it can, consume electricity in a flexible manner." }, { "speaker": "stephan", "time": "28:51", "start": 1730.93, "text": "I see, yeah, that's interesting as well because that differentiates you from, let's say, a A, what would be called a pure play Bitcoin miner, because that pure play Bitcoin miner, as you and listeners know, Bitcoin mining is brutally competitive. That you need to-- you need some kind of advantage, if not multiple advantages, either cheap energy power, maybe you have really cheap access to capital, maybe you have really skilled operations and, you know, efficiency in, in terms of how you operate your Bitcoin mining and your fleet and these kinds of things, because it's just brutally competitive and every four years the, you know, the block subsidy halves. And so- So at the same time, there have been a lot of Bitcoin miners who, have gone out of business or weren't no longer, you know, profitable, and, you know, that can happen when, let's say, energy prices rise, Bitcoin price drops, and at that time, some of these Bitcoin miners get squeezed out. So I'm curious, you know, your view there on how competitive Bitcoin mining is as an industry, how are you going to contend with that, as part of-" }, { "speaker": "kenji_tateiwa", "time": "29:57", "start": 1797.47, "text": "Yeah, great question, Stefan. so it, it is diff-- challenging for us as well, we're not profitable, profitable at this moment, but I think, a-as you mentioned, we, we have the competitive edge compared to other pure-play Bitcoin miners, because we have the, the two-pronged strategy, and when the Bitcoin price goes down and the hash price goes down, usually it, it, it hurts all the Bitcoin miners, but in our case, the second prong Of solving the grid congestion issues, if the, hash price goes down and the miner price goes down, we can use those, cheap miners to, absorb, electricity to solve the grid congestion issue. It's not a very profitable business, but still, there's a, hedging mechanism within our business model. Whether the, hash price goes up or down, we can hedge with a two-pronged strategy." }, { "speaker": "stephan", "time": "30:52", "start": 1852.19, "text": "I see. And so would it be fair to say that Assuming this all works out and, you know, this builds out, Agile Energy X would help, let's say, the parent company, Tepco, save money in terms of grid build out. Is that, that's kind of the business case here or a part of it, right?" }, { "speaker": "kenji_tateiwa", "time": "31:08", "start": 1867.74, "text": "That's great. but not only our parent company, Tepco parent grid, but a-any transmission and distribution companies, and by saving, Allowing those transmission distribution companies to reduce their costs, it will lead to lower costs for the ratepayers, which will be good for, all the, consumers." }, { "speaker": "stephan", "time": "31:27", "start": 1887.34, "text": "I see. And one other question that often comes up is running Bitcoin mining machines off and on. So I guess again, it's different business models, right? But if you're, let's say you're a, if you are a pure play Bitcoin miner, which you're not, but let's say you're a pure play Bitcoin miner, generally the incentive or the, the, the idea is you wanna have your machines running as long as possible. You want it twenty-four seven. You want the minimum downtime. Whereas, let's say in your case, it's a little bit different from that because you Hedgelment and grid congestion. So there will be times when, hypothetically, you have these machines but they're idle, they're just off because, you know, part of your business model is for the mining machines to not be on all the time. So can you explain a little bit of that difference?" }, { "speaker": "kenji_tateiwa", "time": "32:13", "start": 1932.95, "text": "Yes, so, actually, we would, rather have our miners operate all the time if we have, cheap power, but we don't, and so that, that is a challenge in fact. So we haven't been able to completely solve that issue. in Japan, curtailed, power is, zero marginal cost, so we should be able to, procure for like almost free. But, if it's not, curtailed, the normal power price is very expensive. High in Japan, so it makes no sense to do Bitcoin mining. So as, as you pointed out, our business will be, low uptime, and that's, that's challenging. so we do have to, we have been thinking how to compensate for the, Low uptime of the mining, because the critical power, right now it's the, the volume is small, it's gonna increase as Japan, shifts towards decarbonization, but still it's not gonna be like ninety percent critical power, that would never, probably never happen. So we have to come up with additional revenue source, not just from Bitcoin, and not just from congestion, either." }, { "speaker": "stephan", "time": "33:27", "start": 2006.8, "text": "This show brought to you by mempool.space, the world's leading Bitcoin visualizer, and now they've got an accelerator program. So if you have a transaction that you sent at a fee that was too low to get confirmed, now you can fix this with the mempool accelerator. The way it works, you can go and search your transaction, scroll down, click accelerator, and you don't need an account. You can pay with Lightning, and then it'll show you it's now in the process of being accelerated, and then after a few minutes, it's confirmed. And so this is a great way" }, { "speaker": "stephan", "time": "33:57", "start": 2036.54, "text": "And this can happen where maybe your wallet doesn't have RBF or CPFP, or it might help you in situations where it's impractical to go and re-sign, so for example, multisig with keys in different locations. And thirdly, even in some Lightning scenarios, perhaps a forced close, you might not be able to use RBF, and so in this case, the Mempool Accelerator can help you out. So keep it in mind, and you can find out more over at mempool.space/accelerator. And now back to the show. I see. And just to, I guess, just to sort of contextualize, are you able to give us like a rough, like, say, retail kilowatt-hour electricity price in? Tokyo or in, in the region that Tapco serves?" }, { "speaker": "kenji_tateiwa", "time": "34:37", "start": 2076.76, "text": "Yeah, so it, it, it differs from, i-industrial, right? The industrial use, to retail, but it's like, thirty yen per kilowatt hour, which is like, what is it, twenty cents per kilowatt hour or higher?" }, { "speaker": "stephan", "time": "34:51", "start": 2091.13, "text": "I see. Yeah, it's about twenty-one USD cents. Okay, yeah, so, you know, can be relatively high, but as you said, it, it sort of, it's not just on that, it's on the collateral and, congestion aspect of it. And then when it comes to Bitcoin mining equipment, we also have to think about things like useful life. So that might be, I mean, I hear different numbers from people, so I never really know what to believe. But is it four to six years for a, a Bitcoin mining machine? How does that play into, you know, what, what you're doing then?" }, { "speaker": "kenji_tateiwa", "time": "35:23", "start": 2122.91, "text": "Yes, so, so my, my understanding is, is the, the four to six years is the economic life, meaning, after four or six years, right? The relatively, the, it's not gonna be profitable, but it's not gonna, it's not worn down in six, years. So in my case, we can start using the sixth year old mine-miners to solve the great congestion issues, and then, probably it's gonna last for additional five or six years be-before it gets too rusty or something and starts, stops operating. so that, that's our strategy for now. But we, we, we haven't, run our business for ten years, so we have to find out how long it could be last, not only economically, but from like a mechanical point of view." }, { "speaker": "stephan", "time": "36:07", "start": 2167.04, "text": "Right, as in, does the machine still- work even if it's not profitable per kilowatt hour per se, yeah. and then I guess the other question some people might have is, does it have to be renewable or could it just be any energy source that, you know, for the same reason of, you know, Qatar and, grid congestion, could, couldn't Bitcoin mining be applied to other energy sources?" }, { "speaker": "kenji_tateiwa", "time": "36:31", "start": 2191.42, "text": "Yeah, so i-if, so a-a-like the, the starting point is wasted electricity." }, { "speaker": "stephan", "time": "36:38", "start": 2197.86, "text": "Right. So" }, { "speaker": "kenji_tateiwa", "time": "36:38", "start": 2198.4, "text": "rather than being wasted, if we can, Converted into something useful that's good, like, like right now renewable is wasted, but other, power sources like, In, in Japan, the primary power source, currently, it's gas-fired power plants. There's no wasted gas-fired power plants, it could be turned off, a-and so, so it's not wasted, and I, I, I'm not inclined to use, fossil fuel fired power plant, generate power to run Bitcoin miners, but in the future there could be a scenario where, Some of the Japanese, nuclear reactors are restarted and maybe in the long term, additional nuclear power if we, if were to be built. And then there's a lot of variable renewable energy, and then there might be a case where nuclear power has to be curtailed, and that's very wasteful. So rather than curtail nuclear, we may be able to, use that, on site with, Bitcoin miner." }, { "speaker": "stephan", "time": "37:50", "start": 2270.12, "text": "I see, yeah. So it doesn't necessarily have to be with wind and solar renewable, it could also be with nuclear in the future. So I'm curious, from, you know, from your understanding, what would be the main hurdles to that? Is it just around public perception of nuclear? Is it that the government stance on nuclear is different and that would need to change, or is it, you know, the regulatory environment of nuclear? What's the main factor there?" }, { "speaker": "kenji_tateiwa", "time": "38:11", "start": 2291.27, "text": "Yeah, ma-ma-many, obstacles, challenges. I think the biggest is, it's I think, understandably, it's been thirteen years, but still thirteen years, and people have-- many people have suffered from the accident. so understandably, we, we have to make nuclear, much, much safer. It has become much safer, but still there's no No, no such thing as zero risk, so there's this, trade-off, that people have to understand. And also the, the regulatory scheme, it has become, much, more strict, understandably, but it, it's made, even restarting existing nuclear power plants difficult to restart, and then so building new nuclear is very extremely, difficult. But Japan needs more, energy, reliable energy sources. So there, there are discussions about how to, bring back additional nuclear power, but it's a very emotional issue." }, { "speaker": "stephan", "time": "39:15", "start": 2355.42, "text": "I see, yeah. And I, I wonder how much of that is, obviously your career has been in nuclear for, you know, your life, so I'm sure you sort of see it in a different way, but it would be like, I don't know, to me it would be like saying, you know, because there's car crashes in the United States, nobody should drive cars. It's like, well, you know, yeah, of, of course, you know, death and injury is sad, but at the same time, there's a certain level of risk that we just" }, { "speaker": "stephan", "time": "39:45", "start": 2384.93, "text": "I'm curious from your perspective as a, you know, as a nuclear guy, is-- do you think it's like an irrational fear or emotion there that's driving this, or, you know, is there a justified fear or emotion around in nuclear power? Yeah," }, { "speaker": "kenji_tateiwa", "time": "39:58", "start": 2398.02, "text": "it, it, it, it is, I, I won't say it's irrational, it's understandable. I, I-- So my, my, what I've been thinking and I, I wasn't, planning to, say this in this podcast, but in the fu-- I, I think, Japan needs a porfoli-- a diverse portfolio of energy, res- sources, renewable, some nuclear, maybe some fossil, to, to balance. but, in, in, for nuclear, it has to be remote from, populated areas, and Japan is a small country, but there are many remote islands around Japan, and we could set up small modular reactors on offshore platforms, for example. The issue is how to send electricity from those, remote areas, and like, the, the conventional thinking was, to, to, set up a long transmission line from the small modular reactors offshore to main island Japan. But i-it's costly and, we lose a lot of, electricity, if you s-try to send electricity for a long distance. So, t-two ways to solve that issue in a remote, like island, small modular reactor, when we generate power there, we can convert that electricity into other energy, carriers such as, green ammonia or hydrogen, and then send those fuel to main island Japan, and then use those, fuels and run conventional, gas-fired, Power plants by using green fossil fuel or green fuel. That, that's one. The other is we could use, flexible demand or distributed computing on the remote island where we have small modular reactors and convert it directly into other valuable things, including Bitcoin or Computing using our AI data centers." }, { "speaker": "stephan", "time": "42:07", "start": 2526.53, "text": "Fantastic, yeah. And so, let's, you know, bring it back to renewable, I noticed as well, I was looking on some of your slides, you were saying curtailment of renewable power could reach forty-two percent by twenty fifty in Japan. So could you explain a little bit about that? You know, that, that seems really high, but I guess that's also a business model for you, right, for Agile Energy X?" }, { "speaker": "kenji_tateiwa", "time": "42:25", "start": 2545.28, "text": "Yes, that, that, that's one estimate from, one of the quasi-government organization called And it's, assuming that in, in the, by twenty fifty, if Japan were to, achieve carbon neutrality, it has to come from mostly, or a large portion have to come from offshore wind, and where the, vast, potential is in the northern part of Japan, in the Hokkaido island, but it's, there's, there's not much demand in Hokkaido, so there has to be transmission lines, built, to send the off- Offshore wind power from Hokkaido to, the greater Tokyo area, and i-it's, it's very costly and, and still, you cannot send all the offshore wind power, so therefore it leads to massive curtailment. And rather than waste that curtailed wind power, if we can, bring the, demand to the northern island Hokkaido where, near the offshore wind, we can monetize that without wasting, the wind power. And the most flexible would be, Bitcoin mining" }, { "speaker": "stephan", "time": "43:39", "start": 2618.74, "text": "Interesting. And so one other area I noticed is you're talking a little bit about, on the topic of batteries, and so it could be seen that batteries and Bitcoin mining are-- could be seen as in competition, but I think you have a, a point of view that they aren't in competition. So can you explain why?" }, { "speaker": "kenji_tateiwa", "time": "43:57", "start": 2636.87, "text": "Yeah, I, I don't think they're in competition. Actually, it's, it's, it's complementary. batteries and Bitcoin mining or flexible, load, it, it has different roles. Batteries, it's necessary necessary to balance the grid, it's necessary to increase the resilience. When you need power, batteries can store power. Mining, Bitcoin mining can't store power, but Bitcoin mining could be run, all the time, like indefinitely if there's, extended period of surplus, electricity. The issue, in the mid to long term, independent what would happen is, excess electricity will happen, there will be surplus in, there will be- Seasonal surplus in the springtime and fall time when there's a lot of, especially solar power generation but not much demand and it's, kind of difficult to store all the seasonal- Spring excess surplus power by just by batteries. So rather than trying to store the large amount of, electricity seasonally, it's better to convert it into something, valuable, when there's, a lot of surplus. And Bitcoin mine-- it, it doesn't just have to be Bitcoin mining, but Bitcoin mining happens to be one of the flexible demand that can convert electricity, when it happens rather than trying to store a lot of, electricity. But it's complementary, when we need, when we have to store, there are, cases where we have to store power, and in that case, we do have to have batteries." }, { "speaker": "stephan", "time": "45:32", "start": 2732.32, "text": "So as I understand, this can also mean things for- Business case of energy sources, that it may be that over time people start to build in flexible demand, Bitcoin mining and other ideas, that could help new electricity projects get up or get started because of this aspect, that maybe it helps you save certain costs, and then that is what justifies the creation of some of these, projects, because now you can sort of have this Bitcoin mining as, a factor that- Just kind of takes some of that electricity and you can either scale it up or scale it down, as needed." }, { "speaker": "kenji_tateiwa", "time": "46:14", "start": 2773.65, "text": "That's right. as a result, in, especially in the case of Japan, if we want to achieve carbon neutrality and if we have to, rely on variable renewable energy, we have to overbuild the variable renewable sources, which means more curtailed power, more, wasted power, and rather than Wasting, if we can have flexible demand like Bitcoin mining that can monetize the to-be-wasted power, it will allow the country of Japan to overbuild, var- the variable renewable power, by, like providing additional revenue source for the renewable power generators." }, { "speaker": "stephan", "time": "46:58", "start": 2818.28, "text": "I see. Okay, and also, you've mentioned, this idea of the ultimate circular economy, so could you explain a bit about that idea?" }, { "speaker": "kenji_tateiwa", "time": "47:07", "start": 2826.55, "text": "Yeah, thanks for asking. So when I was thinking, as we, previously discussed, the, the low uptime, it's a big challenge to make our business profitable. So I was thinking how we could, create additional values. so first we'll start with wasted renewable energy and use that, energy to make- Bitcoin and then we get wasted. So when we run m-miners, we get, wasted like sixty degrees Celsius, hot air coming out, from the miners. And rather than just, like dissipating the heat, to the atmosphere, I came up with two ideas to use the waste heat. one is to heat the greenhouse, which will house the so-called aquaponics system. Aquaponics, it's a combination of, aquaculture and hydroponics. It's a eco-friendly, farming where, this fish at the bottom, we fit, feed the fish and the fish waste is decomposed by the b-bacteria and turns into nitrate, which will, become fertilizer for the vegetables, on, on the top, and the vegetable will purify the water and, clean the water, for the, for the fish. So that's the aquaponics, and if we, have the aquaponics in the greenhouse, during the winter, we could The waste heat from, the, the Bitcoin miner. That's one use. The other use for the waste heat is to combine the Bitcoin miners with direct air capture system. Direct air capture system, it captures the carbon dioxide from the atmosphere, and the way direct air capture, works is, We, we use, temperature difference. So there's an adsorbent that adsorbs CO2 from the atmosphere, and when we heat the adsorbent, it, desorbs the carbon dioxide, and we get 100% pure, CO2 gas. So that, that's direct air capture system. And rather, and, and once we get the pure CO2 gas from the direct, direct air capture system, we use, CO2 in two ways. One is to feed the CO2 gas to the aquaponics system where, we have vegetables, and then it will promote, photosynthesis, so it will, the, the plants will grow faster, using the CO2 gas. The other, way to use the CO2 gas is to combine it with, molten salt electrolysis. So molten salt electrolysis, when you heat salt up to several hundred degrees Celsius, it melts and the molten salt melts various materials, including CO2 gas, and the CO2 gas becomes carbonate ion, and when we apply electricity to the molten salt, the carbonate ion splits into oxygen gas and carbon, solid carbon. So the carbon becomes either graphite Or in some cases, it becomes diamond, crystallites. And so, a- and, additionally, for the aquaponic system, we use, kitchen garbage for feeding the fish, not directly, but using kitchen garbage and, having the insect larvae to, decompose the garbage into compost, you get compost, and then the, insect larvae becomes fish food. So this Circular system, all we need is wasted renewable energy, air, garbage, and internet connection, and then we get Bitcoin, eco-friendly fish, vegetables. Carbon negativity and diamonds. So this is the concept of ultimate circular economy." }, { "speaker": "stephan", "time": "51:07", "start": 3067.45, "text": "Interesting. Yeah. So, just thinking about the grid and the make, the, the breakdown of that. so I guess, just looking at a chart here in terms of overall breakdown of, you know, petroleum, coal, natural gas, renewables, nuclear, hydro. Obviously, as you mentioned, after 2011, the nuclear just really dropped off. I'm curious what you see the- The future of, you know, Japanese, electricity production looking like?" }, { "speaker": "kenji_tateiwa", "time": "51:34", "start": 3094.42, "text": "Yeah, that, that's, difficult question. we, we, I, I, I do think, we should aim for more renewable. But, not only renewable, as I mentioned, it's gotta be a balanced portfolio. So I, I've been thinking about this concept of anti-fragility, the concept that, Nassim Taleb, mentioned in his book Anti-Fragile. i-i-i-the Japanese energy system, it should be more than just robust, but becomes stronger when there's, external stress. And in order to achieve anti-fragility, it's gotta be, Japan has to have a diverse mix mix of, energy portfolio and, with the concept of being, become stronger with external stress. So not only, renewable, but some nuclear, but not only conventional nuclear, but as I mentioned, in offshore, platforms, small modular reactors and combining it with various, energy carriers or, on-site, conversion into, various, value creation, technologies. And, also, o-also, I think, biogas generation, it's, promising. Biogas, you get methane gas from, fermentation of, cow manure, for example. So it can be combined with dairy farming or like, Th-those kind of, farming, and then the manure can be turned into, fuel, and then you can generate power. It's kind of, renewable power, and it's, it can be used as base load. So by using biogas system, it will help Japan, achieve, Food, national security at the same time, energy, national security at, at the same time. So I think we should push for more biogas, generation." }, { "speaker": "stephan", "time": "53:36", "start": 3215.98, "text": "Fascinating. Okay. So yeah, lots of things, Sort of all coming together here with Agile Energy X, so what's the, you know, the, the next, you know, next few things for Agile, for Agile Energy X?" }, { "speaker": "kenji_tateiwa", "time": "53:50", "start": 3230.21, "text": "Yeah, yeah, thanks. so we, as I mentioned, it's, it's not very, it's challenging to make our business profitable, and we need to be creative, not just trying to, use wasted renewable energy and mining Bitcoin, but we have to come up with additional revenue sources. And ultimate circular economy is one, one method, but there could be more. And as, I've been, talking about my concept, many, People and companies with, different ideas and, technologies. They come to me and, ask how we could collaborate. And through that, not only from Japan, but outside of Japan before, as well. So, my, my hope is to collaborate with, the global community so that we can work together to, make the world a better place, using, wasted, energy and creating value" }, { "speaker": "stephan", "time": "54:51", "start": 3291.09, "text": "Fantastic. Well, links will be in the show notes, so it's agileenergyx dot co dot jp slash en for the English website, obviously. but, Kenji, really fascinating discussion and, yeah, I'm interested to see what happens with this. So, thank you for joining me today." }, { "speaker": "kenji_tateiwa", "time": "55:07", "start": 3306.56, "text": "Thank you, pleasure talking to you Stefan." } ] }