Sazmining Podcast Episode 21: David Magid on the Economics of Solar

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Synopsis: 

In this episode of the Sazmining podcast, Will speaks with David Magid, CEO of YSG Solar. They discuss the economics of solar farming, the intersection between solar power and Bitcoin mining, and more.

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Will Szamosszegi (00:00):

What's up guys, William sank here. I am very excited for today's episode. We got a very special guest I'd like to thank you, David, for coming on.

David Magid (00:08):

Thank you so much for having me, you know, definitely very excited, you know, to chat today and, uh, what interesting topics?

Will Szamosszegi (00:15):

Yeah, well, a lot of the guys that we have on the podcast, they're experts in blockchain, cryptocurrency mining, but a lot of the cryptocurrency miners are always trying to get in the room with people like you, who are executives at energy companies, really excited to dive into that. Maybe what you could do is you could start by talking a little bit about your background and what led you to what you're doing today at YG solar.

David Magid (00:37):

Yeah, my background, you know, originally came, you know, loved the technology space. Um, actually started a, uh, web hosting company when I was really young, um, back in like, you know, the early two thousands, so loved the technology aspect of it. And then, you know, kind of years later, you know, just coming out of college, you know, was attracted, you know, very much to renewable energy and energy efficiency. And, uh, you know, that really led me, you know, down the road of, you know, learning how, you know, energy is generated, how it's being distributed and how it's being used. Uh, which I thought was just so fascinating. And, uh, you know, even earlier today someone's like, why'd you, why'd you get into solar? Like what, what is it, what was it, you know, that kind of attracted you, you know, to that, that field. And, uh, you know, I think it's really the fact of how simple, you know, using the sun and using the equipment, generating electricity versus, you know, the, the complexities of, you know, fossil fuels and commodities was, uh, certainly really attracted me. So, um, yeah, man, that, that really brought me, you know, brought my interest and attracted me to this field, but stuff we do love that, you know, technology, you know, sector and, um, you know, I missed my days, you know, playing around in C plus plus and all other good stuff that, uh, that used to do

Will Szamosszegi (01:54):

<laugh> yeah. Well, I, I had actually listened to the podcast that you had done with Benno and thought that, uh, it's really, it was really interesting hearing your journey of like how you started Y SG and then how you ended up, uh, pivoting. So, I mean, today, what you do as a company at Y SG, like what's your main focus, uh, within the industry?

David Magid (02:14):

Yeah, sure. No great question. I mean, you know, just like any other industry, you know, there's so many different segments and, uh, you know, with Y SG, you know, what we're doing is identifying, you know, large parcels of land and either going through a process of entering into a long term lease agreement will release out the land for 35, 45 years, uh, for a fixed rate, uh, or we'll go through an exercise of actually purchasing that land. And so once we go to the land acquisition process, we obtain all licenses, approvals, entitlements, you know, to actually construct a solar facility in a solar farm. And once that process is completed, then we're going to the market and actually marketing all of the, the electricity, you know, that's being generated from the solar farm. And, uh, that process looks really different depending on where you are, you know, what state you're located in. And then we will enter into these power contracts, um, you know, with municipalities, corporations, entities like that. Um, you know, we've worked with, you know, folks like the New York military academy and just to kind of name a few. So it's, yeah, it's been pretty, uh, pretty exciting know to say at least,

Will Szamosszegi (03:25):

Wow, I actually had no idea. So you guys are literally down the pretty much the entire chain there. You're going all the way from land acquisition to going and taking the, taking it to market. That's pretty impressive. Yeah.

David Magid (03:37):

It been exciting. We feel like we just have more control over that, you know, versus, you know, other processes in the industry, you know, it's, it can be common for, you know, projects to be acquired, um, in various stages. But we always like the fact of really understanding, you know, the opportunity, you know, how it's being generated. And so, you know, I think you even, especially for some of your listeners, you know, who may be, you know, involved in, uh, in, in that mining sector, um, or familiar with data centers and citing that, uh, I think there's a lot of overlap, you know, with, with what we do when we're citing, you know, these types of solar farms and saying like, you know, where do we put this project? You know what, like, what's our, you know, step number one.

Will Szamosszegi (04:17):

Yeah. So there are gonna be a lot of questions that I'm about ask about this, just cuz there's so much that I wanna know about this. Just starting with the land perspective, how much, how many acres do you need in conversion to megawatts? So like let's say you want five megawatts worth of power. How do you normally think about that from just the amount of land that you need to actually get all that energy running

David Magid (04:38):

For that five megawatt facility that you're talking about? You need about 25 acres of land, 25 to 30 acres, depending on that solar project. You know, there's some of these solar projects that we're using tracker units where they're actually tracking the sun either in one direction or two directions, which increases the productivity, you know, of that solar, you know, facility, maybe another 15%, which could be huge. That's how I would think of this on a, on a per megawatt basis. You know, usually our Luo thumb is just looking at five megawatt, you know, five acres per megawatt interest. And uh, you know, and then when you're looking at the other component, which is a little newer, is this energy storage, you know, units. And that is something that we're starting to see more

Will Szamosszegi (05:19):

And more from the energy storage. Where is that technology up to today? Is it something that whenever you're building out a project, the majority of solar projects are already incorporating some sort of energy storage component or is that just, is it still really early in that process?

David Magid (05:34):

You know, it's still really early in that process. There's a key benchmark of where pricing needs to be for this to be economical. And it's about a hundred dollars KW and you'll see that in tons of reports and we're just not there, not that price mark just yet, you know, once it hits that price, mark, you know, that's when things are really gonna fly, that being said, that doesn't mean that storage doesn't make sense because parts of taxes and there's huge capacities of storage that is being devised. And for YG as an organization, we're in the process of developing, uh, a storage project actually, you know, locally in, uh, in long island. But for us, we really look at it on a, on a key market understanding, you know, how that storage unit is gonna work. And that's because batteries are so unique, uh, you know, in, in solar batteries is like the, the holy grail. Cuz when you look at energy as a, as a commodity, it's really the only commodity that you can never traditionally you can't store it. So when they operate the grid, it's always a balancing act, which is inefficient since you're always overproducing to have that redundancy.

Will Szamosszegi (06:41):

Yeah. It's fascinating to hear how, how the storage component is being worked in right now from an economics perspective. That's still something where I'm trying to wrap my head around it may maybe to start, if we want to talk about the economics behind solar, how, how are you planning out the, the economics? How do you look at it? Uh, what sort of timeframes are you planning for? Uh, know that there's a lot in that question, but however you wanna take it

David Magid (07:06):

<laugh> no, I think that's such a fair question. You know, when we're looking at a market to develop solar right now, we develop nationally. So we're looking at key areas to focus on and Arkansas is a big market. You probably wouldn't think of solar in, in Arkansas. Um, but right now there's, you know, some interesting policies and interesting demands. Walmart did a great job of working with the state to carve out, you know, some very interesting policies that really support enablement of development. So I think that's one item, you know, that we look at is the policies and understanding the environment and how friendly the environment is to renewables because we are making a big investment, just like any other infrastructure, which I imagine, you know, same thing when you're looking at a mining facility, you're probably looking at kind of the, the environment and you know, how is the, the, the local community gonna be accepting of the data, which is something I'm actually interested in asking you, if that comes up, you get some resistance from the community from mining that, but to answer your question, we looked at the policy and then we're also looking at what we're expected to sell that revenue.

David Magid (08:08):

What can we expect to see? And then we're also looking at the quantity of generation, what the solar radiance is in that area. We take that we take any market incentives, policies, and then the expected revenue and potentially it could be a buyer too, you know, so if we have a relationship with someone and they have, you know, multiple facilities, we could take that in consideration, take all those variables put together and really going through a financial exercise if it needs the clients, you know, and objective to maybe have, uh, environmental benefits or economic benefits. And for us looking, if it needs a, a financial, you know, return, which is usually based on, on an internal rate of return, IRS is usually how these projects are, are

Will Szamosszegi (08:48):

Based. Yeah. I remember when I was speaking with Benno, we were talking about how it's such a big piece of it is just the incentives portion. Like how, where can you find those incentives and make, make the economics even more favorable? It, it's almost driving certain, uh, renewable projects to certain areas, which is pretty fascinating on a actual planning perspective, like on a payback time, what's the life cycle for these panels. And how long are, are you normally looking at trying to get your, your investment back and, and make that return?

David Magid (09:19):

Great question. Just for some simple numbers, lifespan of solar panels, 35 years is kind of where we're looking at. 'em 25 years is, is a guarantee on the equipment, but 35 years, the lifespan, you know, each year there's a degradation of 0.5%. That's always factored in, you know, when you're looking at this and, uh, one of the other aspects you're looking at like a, an actual return, I would say it also is gonna depend on that investor of like what, you know, what your expectations are, but could be as little as four years could be as long as seven years. So anywhere kind of falling, you know, between those numbers and the reason why there could be a difference because also there's, you know, developers developing these projects. So even if a project can pay for itself in three years, it may cost someone, you know, when, by the time it gets sold with the added margin, it may, it may end up being, you know, seven years just because that's kind of what the market is, is really looking at.

Will Szamosszegi (10:14):

Wow. That's interesting. Yeah. I, I didn't know that cuz the, the mining, we, we have our own type of cycles that we're dealing with and you can have the building, the infrastructure, that's not the actual mining chips and the, the infrastructure's gonna last much, much longer than the actual mining chips that you're running 24 7, trying to really get as much hash power out of those, to mine as much Bitcoin as possible. So, um, it's really, it's fascinating to hear that on, on the solar side that those panels have that long a lifespan.

David Magid (10:43):

So question for you. So with these mining facilities, something I've been thinking about is what type of equipment can you maintain? You know, I understand that maybe the equipment made the technology need be outdated in three years, two years, four years, I mean four years. Is that, is that right? Is it like out of date at that point?

Will Szamosszegi (11:02):

Yeah. It, it takes into a account, a number of different factors. So it depends on the type of equipment that you're buying. So in particular, sure. The assumption here is that we're mining Bitcoin. So if you're mining Bitcoin, you're using a machine called an ASIC stands for application specific integrated circuit. And there are a number of different manufacturers out there that come out with the Asics four Bitcoin mining. That's really important because you can't use these to mine. Some other cryptocurrency they're specifically for Bitcoin. And what we've seen over time is that the miners get better and better. So these, uh, manufacturers have been innovating and getting more and more efficient with their chips. So naturally just with the evolution of technology within these mining chips, you're getting better and better equipment that can process, um, and get more hash power out of the same amount of power consumption.

Will Szamosszegi (11:55):

And so because of this generational gap, equipment becomes obsolete over time. So to answer your question specifically, uh, the length of time that that hardware is going to last depends on what kind of hardware you're getting. If you're getting the newest generation hardware, or if you're getting older generation hardware and how you're running it, because if you run it in very good conditions and you're not gonna destroy it, and you're gonna be able to keep in mining for a number of years versus if you put it in some sort of small air base container in a really hot environment and don't take care of the equipment or clean it, then that equipment could break after a year or two, which is really bad because that's like where the majority of your costs are going <laugh> so it, it comes,

David Magid (12:39):

It takes to

Will Szamosszegi (12:40):

Account a lot of, a lot of factors. Sure. Yeah. But the payback period can be very quick, very fast if you have low cost energy. Um, that's one of the things where I really wanna also understand on the solar side and maybe just to, to talk in a way where everyone can kind of gauge the power pricing. A lot of times when mins talk about cost per kilowatt hour, that's how they're benchmarking it. So they'll say we have an all cost per kilowatt hour of X sense. So let's say if you're a very competitive minor, you might be somewhere in the 3 cent range, like a three to 4 cents. And that's very, very competitive. You're going, and you've done a lot of research. You've found some of the lowest available power out there and you're able to get it at that rate. And we're seeing a lot of people able to get that rate with stranded power assets or something where they can get that cost down.

Will Szamosszegi (13:30):

Whereas some people who might not have as competitive of a rate could be much, much higher than, than that electricity cost. Um, and that is obviously still gonna be profitable in today's environment with Bitcoin's price, sky high. But, um, the name of the game is trying to protect yourself on the very bottom end. If we see 85%, yeah. 85% draw down, you could be one of those people that whose profit margin, uh, disappears at like a 60% draw down and then you're in trouble. Yeah. So yeah, that's a little bit of background on how, from a minor's perspective, we're looking at electric, um, power costs,

David Magid (14:09):

Let's say your energy pricing was like, was fairly stable, like fairly stable, that was fairly low. Would it still make sense to run at, you know, a less efficient hash rate, you know, with some older equipment, if your power pricing was that cheap and like that consistent

Will Szamosszegi (14:25):

In today's environment, it, it definitely does. I can actually run you through what happened recently because there was, there's a lot happening with the Bitcoins Bitcoins price. But, um, if we just wanna summarize it, there's a point in time when the mining difficulty, and this was around the time of, uh, when the price really tanked and the beginning of the liquidity crisis in March in 2020, and Bitcoin's price went to like just under four thou or about $4,000. And so at that time, you couldn't mine with, uh, an S nine or the older equipment. It just didn't make sense. Even if you had extremely, extremely cheap power, it was, it just wasn't really worth it. Then once the price started shooting up in Bitcoin, all of a sudden you saw a bunch of S nine S and the older equipment coming back online. Wow. And, and being run profitably now, just because the, the margins back there. So you're, you're really looking at those two, two variables when you're evaluating the equipment outside of the electric, you're evaluating the price of Bitcoin and you're evaluating the competition on the network for the Bitcoin reward. Right. Which is the hash rate difficulty. So,

David Magid (15:33):

Cause I'd imagine there's so much equipment that like, like you said, just either they're not operating it properly. And where does all that equipment go? You know, <laugh>, this is all lost. Is there a way to like reuse that equipment to optimize it? You know, which I'm sure people are figuring out of the best way to kind of run that equipment and, and, and kind of reuse in that

Will Szamosszegi (15:51):

Aspect. There are certain businesses within this industry that will make it their whole business to go get other batches of equipment that might have been run at another facility, clean it up and resell it to someone else. Who's another minor who might have that cheap power rate who can run it efficiently enough.

David Magid (16:07):

Yeah. No, that makes a lot of sense. And it's saying I've been like thinking, going through my mind. So I'm, uh, I'm glad I got to get a good answer from an expert here. <laugh> <laugh> it was a perfect opportunity, but yeah. So going into power pricing, things that I look at, which are, are interesting on power is, you know, the actual power pricing, which is for that electricity. And then we have moving that electricity, the delivery of it, you know, usually when we're looking at these, you know, these utility scale, you know, solar projects, you know, you have a price and you have an obligation to deliver, you know, that to a specific mode, right. That's where that price determination, you know, is given, you know, on that boss or mode, however you would describe it. And then past that, you know, there would be some sort of cost associated with, you know, with, with wheeling or moving that electricity, you know, through the network, whether it's through a, a transmission, you know, network or distribution for anybody who does not know that on the, in any of our listeners here, our transmission system think of that as like our interstate highway, you know, very large power lines and our distribution network, that would be like, you know, a common roadway in a, in a neighborhood.

David Magid (17:11):

Um, and those are more traditional power lines that you could see in a street. So that's kind of the two different networks that interact with one another. That's kind of the first thing I would look at when I'm evaluated pricing is, you know, where am I delivering it? Am I delivering it on the distribution network? Am I delivering on the transmission, you know, network? And those are kind of the items that I, that I typically look at. I don't know if, if people get that granular, you know, when looking at, or if they're just looking at the all in price, is that, is that typically how it's done

Will Szamosszegi (17:36):

When we're laying out the all in price we're trying to take into account every single piece of the cost structure that goes into getting that energy delivered when I gave you that bottom range of pricing, that is very, very competitive pricing, cuz it includes all those things like taxes, everything delivery, but you have miners out there that are four times the cost of that electricity. Oh, and still in a bull market be running profitably. But if there's a huge downturn, then those miners could fall outta profitability. John.

David Magid (18:05):

Yeah.

Will Szamosszegi (18:07):

It's a competitive, very, very competitive network. It's, it's built into the protocol. If you think about it, just pure competition where if the price goes up in Bitcoin, then more miners can come online. But as soon as the price drops, then all the miners who came online that weren't efficient enough get wiped out. So it, it really does try and create the most efficient compute network to support Bitcoin. And I think that that's, um, it's a very valuable, very valuable thing to have a network backed by that type of a system.

David Magid (18:37):

Yeah, no, that makes me think of a few things. I know one mining facility that I kind of was, was looking at, you know, a facility and it looks like they were connected actually on the, on the transmission, you know, network, uh, which I thought was interesting cuz obviously I kind of bypassed a cost associated distribution and it looks like they were, they converted another type of facility manufacturing that used a lot of, of energy. And we're converting that into a mining facility. Has that been a common theme that you're seeing is like kind of these old deal mills or whatever they are like old industrials, like being converted to, to mining stories.

Will Szamosszegi (19:09):

Yeah. Or what what'll happen a lot of the times is a mine will go out and they'll start evaluating a site. And so they'll go and run an analysis on the, really, all the costs that are involved with getting that facility up and running and getting, figuring out how expensive that electricity is going to be. Once that facility is fully operational and there's certain times where you'll go to a site and you'll be able to get that cost down, but you might need to invest a decent amount in the electrical infrastructure. And then just build that into sure. The pricing that you're taking into account, there are a lot of structures out there and there are a lot of minors who are really trying to learn the power side of the business, which is, um, you know, a whole separate thing from understanding the actual mining cycles and everything else.

David Magid (19:52):

Yeah, no, definitely. I mean, I think there's such a strong correlation with that as well too. And I think, you know, for the energy structure as a whole, you're looking at oil pricing, you know, which is, you know, sniffly Heights up, we're at a point where electric vehicles are really moving at such a drastic pace where I couldn't have predicted that at

Will Szamosszegi (20:10):

All. I'm really, really curious about how that's all progressing and I've kind of just read articles one off here and there, but do you have any insight as to like what's happening in, in the infrastructure development, the batteries and, and all of that?

David Magid (20:25):

Yeah. I mean, I think the big item is a, you have the battery costs with these raw materials for these batteries are definitely a scarce resource. So that's a big item right now. And the biggest resource that we have of those additional commodities, you know, where to actually mine, those is at home and our cell phones, you know, everyone's got three or four phones that they've had, you know, from the last versions and lithium ion batteries, all their electronics, you don't even know what to do it. So when you look at all of that, you know, that is actually a very large resource currently on taps. I think that's one item is the lithium ion this resource of it. And you know, certainly the cost driving that cost down, you know, has been huge it's can continue means to get driven down. Uh, other aspect of it is the types of vehicles.

David Magid (21:09):

Right. You know, so I think right now it's amazing. Even from like the past couple years, you know, the quantity of electric vehicles that are available in the marketplace versus a couple years ago really was not too much choice. Right. So it's like, do I want a Tesla? You know, or do I want like, you know, Prius or volt, whatever it is <laugh>, you know, now there's, you know, go get yourself an electric range Rover, you know, get yourself an electric Maserati, like whatever it is, you know, it's, uh, it's there. So I think that's an interesting trend. One other component that you're seeing a lot right now is the electrical charging infrastructure. You know, I think everyone thinks about it. I know that's what my wife said when we got our car just like, where are we gonna charge it? What if we run outta a charge? That's

Will Szamosszegi (21:50):

Like the first

David Magid (21:51):

Question. Yeah, yeah. Right. Is that your first question you think about like a car you're like, where am I gonna

Will Szamosszegi (21:55):

Charge it? How am I gonna go on a road trip? I'm just gonna like stop halfway and like charge my car for like an hour. Like,

David Magid (22:02):

So I, I think to that point longer ranges of charges, like that's still something that's huge. I think on the other end, you know, the quantity of my, uh, of money, you know, being proposed and put together both on, you know, state level on our federal level, um, to actually build this, you know, electrical charging infrastructure, you know, really builds VC, you know, charging stations, you know, that are super fast, you know, and can charge up your vehicle, let's say 20 minutes, you know, whatever it is, go inside, you know, get a bite of pizza or whatever it is, come out, your car's fully charged. You know, you got another, whatever, couple hundred, you know, you know, miles on your vehicle. So, um, I think those are kind of some major trends. And I think big picture, you know, I would kind of agree that like everyone's, you know, I think the, the vision, I think everyone shares that vision of a combining your Ubers of the world's ride sharing autonomous vehicle and the electric, you know, those three, I think are triple threat. And I think we're gonna see that a lot sooner later.

Will Szamosszegi (23:02):

It's kind of crazy when you hear some of those targets of when they're trying to get, for example, what was the target in California where they're trying to have it only be electrical vehicles being sold by, um,

David Magid (23:14):

2030? Was it,

Will Szamosszegi (23:15):

I thought it was 2030. Yeah. I didn't wanna say it cause I, I just, wasn't trying to 20 30, 20, 35, but somewhere

David Magid (23:22):

Around sounds.

Will Szamosszegi (23:24):

It's just crazy here. I think it is though. Yeah. And, and then on the other end, this is one thing before I forget to ask on the policy side, the policies that are being put forth right now, how do you think that that's going to affect the current renewables industry and the non-renewable industry?

David Magid (23:42):

I think that policy makers, you know, need to really open up the market a little bit more. We track so many policies on state levels. And I think you see too much of kind of what you alluded to boom and bust. There's lots of incentives we run to Illinois. And then a couple months later it's done, you see too much of that from a business. You want something that is predictable and sustainable and something that can really go off of free market principles. I think that's really the direction that, uh, you know, we need to really move towards is, is having kind of keeping those principles in minds. And I think that the technology is really amazing right now and it's gonna continues to evolve. And I, I, you know, very confident, you know, that it, it will be the leading source of energy.

Will Szamosszegi (24:28):

It's one of those things where at some point you're going to have to go full renewable. The way I look at is like, you're eventually going to run out of non-renewable energy sources. It could be really, really far in the future. It could be sooner than people think, but at some point that transition has to happen. It seems like that transition's happening, uh, pretty quickly right now, which is pretty, it's pretty crazy to see. Yeah. Some of these announcements.

David Magid (24:53):

No, it, it really is. I mean, I could think back in like 2008 and like 2007, when I feel like that's when, like you started here, like green, green, you know, with all these different terminologies, environmental friendly. And, um, it started taking off and things started moving, but I feel like right now we, you know, we have that track record, you know, as an industry, we have that proof of concepts, you know, we've been doing this, we've been building these projects, you know, they're there. And just the cost of capital and people looking to invest in these assets, they get it. Right. You know, so the money's there, people are looking to put their money to work right now, solar winds, renewable energy, you know, have been a really optimal source of that. And, you know, I think kind of taking to, to really, you know, your expertise of matching that, you know, with, uh, Bitcoin and mining, you know, different cryptocurrencies is really, that's like the next step that I see of like what's, you know, evolving as we get to that level too.

Will Szamosszegi (25:45):

Yeah. Mining is, is interesting, cuz it's almost like it's like a new type of energy storage solution. It's kind of a weird way to think about it initially. But when you actually come down to it, you have something that will consume that energy and will directly produce Bitcoin. So rather than storing it and needing to sell it later on, you're utilizing it right off the bat and producing this digital commodity, uh, Bitcoin that's instantly liquid. So it's almost like a different type of energy storage where you're D you're just driving cash flow right away. Uh, there is the cost and the infrastructure that needs to be built up front. But, um, yeah, it's, it's almost like a different way to look at storage. And one of my, I guess, bold predictions of how the future's going to look is that I think that it's going to be a, an integrated part of the, um, energy sector and, and balancing out the grid and everything else. But I think that we're definitely a ways away before that ends up happening. We're only 12 years into, into this industry. <laugh>

David Magid (26:48):

No, you're right. It's so crazy. When you say that 12 years into this industry of like, you know, how, what early days that we're in. But I think it's exciting just to kind of be at that forefront, you know, of that industry. And, uh, I couldn't agree with you more on the fact of like looking at that asset as, you know, energy storage, um, you know, and it makes so much sense, especially if you look at, you know, the heat that comes off of, you know, those units and, um, you know, you know, being able to take that heat and, you know, convert that as well, too, you know, cuz that's energy, that's being wasted right there. Um, and finding other ways to kind of utilize that, uh, you know, I think is, is really interesting as well. So I think there's, there's so much room for, you know, energy efficiency and rightness and it all kind of goes into like a, a good principle, you know, of, of being a good, you know, minor and really doing an efficiency and kind of thinking about very methodically, you know, about like every little component, you know,

Will Szamosszegi (27:43):

How old is the solar industry?

David Magid (27:46):

I mean, solar industry is geez. Uh, I think the first solar cell, I wanna say like, you know, this, you know, 50 something bell Atlantic, you know, so that's like when the, you know, and that was us, you know, so that's like first solar cell is kind of right dead in there. Then you go to, you know, fast forward to Carter administration, you see solar panels, you know, on the roof of the white house, solar, thermal, not solar electric. So, you know, I think for a while in, you know, in the, in the seventies, um, after you have, you know, the oil embargo, you know, there's a big push towards solar thermal, um, you know, which I think you, with that technology, you could do something interesting with your, your mining. Let's talk about that. Another, another part too, if you, cause it's got a lot of principles of, you know, heat exchangers and taking the heat and off that mining equipment and, and moving it elsewhere, um, for other use, but so kind of fast forward there, you know, then it kind of died off, you know, solar industry kind of just, you know, fell apart right there, not really too much movement, uh, and fast forward, you're starting to see issues with not only high power prices, you're dealing with an infrastructure system that's, you know, a hundred years old.

David Magid (29:02):

So I feel like the solar industry also has a lot of that, you know, crypto, world's always talking about, you know, distribute, you know, a distributed network, right. And that's always been big on the solar system, was having these, you know, distributed generation projects, which is literally what we call it. Um, and that's kind of what we call these, these smaller systems kind of operating, you know, in unison with one another, you know, as a whole. Yeah. I dunno if that gives like a short synopsis of it. You know, I came into the industry 2007, you know, it was like, uh, first times I got my hands on a, on a solar panel and when I got, got into the industry and, um, you know, at that point, you know, solar power, the, the price for a solar panel was probably like 11 or $12 per wat today that same solar cell on a unit basis is about 20 cents a. What? So just to give you like an idea of like pricing of like how crazy it's like dropped,

Will Szamosszegi (29:57):

Oh my God. Wow. That is, that is nuts. <laugh>,

David Magid (30:02):

Isn't crazy though. I didn't even think like $12, whatever it was, you know, to 20 cents.

Will Szamosszegi (30:08):

Wow. So, I mean, is that a trend that that's continuing? Like,

David Magid (30:12):

I don't know how, how far can it go? I, I, I don't, you know, that's the other thing in the energy industry is like, I think that right now we are really, you know, what else are we gonna do? You have, you know, power pricing on the wholesale level, you know, 22, you know, $20 a megawatt hour, you know? Right. Like, are we just gonna give this away for free <laugh>, you know, so it's like what what's going on, you know, and there's there's um, you know, so I think that's, that's something very interesting, you know, to be said. Um, and it's not obviously all like that. There is definitely higher, you know, rates in, in, in other markets. Um, you know, but I think the fact of, you know, those costs have come down, I think they have hit a floor, you know, in the power prices. And I think they are slowly starting to creep up. Um, and I think in regards to modules, I could see them coming down a little bit more, but I mean, at the same time, you know, you have a solar panels made out of silicone temper glass, you know, aluminum, you know, there, there is demand for those commodities as well. And regardless how much, you know, a country wants to subsidize anything. I mean, you know, I think there's, there's a cost there. So

Will Szamosszegi (31:16):

Yeah. Well, aside from the, uh, the mining and solar talk, one of the things that I like to ask is, uh, what is your favorite book? And the, the one, the one reason why I like to ask this question is I feel like a lot of times people have a certain book that has shaped the way that they think about things. And it's always interesting to hear kind of like what the, what their favorite book is and what lesson they've learned from, from that particular book.

David Magid (31:44):

Sure. No, it's definitely a great question. Cause I feel like I'm like, oh, just reading something else. But, uh, my favorite book is, uh, crisis and it's, uh, it's an older Henry Kissinger book and I just, you know, really love that book. I mean, I feel like it's, you know, obviously every, everyone's got a, a different business that you're in or different, you know, you know, political, whatever you're doing, you know, I feel like there's always situations, you know, that counselor coming up and, um, you know, I think it's, it's important to be able to deal in those high tension, high, quick, you know, situations where decisions have to be made, um, and tough decisions, you know, always have to be made. And I think regardless of business, you know, life that's always something that occurs and, um, you know, being able to make those decisions I think is, is crucial. So I think that's, uh, definitely a, a, you know, a favorite book of mine. Um, but she's not, I could definitely name a few here, so <laugh>,

Will Szamosszegi (32:42):

Well, yeah. What, what are some other good ones?

David Magid (32:46):

So I would say like another, you know, great book, you know, was, um, I think the selfish gene, you know, was a really good book. I feel like that one kind of put like a lot, you know, of thought process, you know, going through my mind, um, you know, regardless I just, you know, for me kind of understanding and, and seeing other people's viewpoints I thought was, is really interesting. And, you know, even going on the, you know, the energy sector too, um, talking about oil, you know, John D Rockefellers, autobiography tightened. Um, so always, I personally always enjoy reading those, like stories of people's lives and, and kind of learning from history on that end. But, um, what about you, what's, what's your favorite

Will Szamosszegi (33:28):

<laugh>, you're, you're actually the second person to recommend that book Titan, uh, the John D Rockefeller book, uh, to me within the, yeah, within the past, I think it's like three weeks or something. Um, so, and you gotta read it. I actually found the book and I haven't started it yet, but I'm getting ready to start it. Um, so I'm gonna, I'm gonna have to read that you read yeah. On my end. Yeah. A couple of times I've, I've been on these, these episodes. People have asked me my, my favorite book. Um, I'm forgetting which ones I've said so far, but I think that the one <laugh> that I, the, the one that I think I read early on that, um, that I think just kind of shaped the way I look at a lot of things is this book, um, called how to win friends and influence people.

Will Szamosszegi (34:16):

And, yeah. Uh, I just remember when I first read that book, it just opened my eyes in so many ways to things that you never really think about. I mean, you learn so much in school about these different topics, like, you know, just the normal core curriculum, but they never teach you. Sure. Uh, those types of lessons really like you're, you should pick 'em up along the way, uh, as you're go growing up and going through school, but it was really interesting to just see it all kind of like laid out in like a single in a single book. So I would say that, that one's probably, um, the most, I would say the one that I would recommend the most to anyone who hasn't read it. Uh, yeah. One thing that I, I really would love to hear your opinion on is from a, a minor's perspective. We're looking at all these different options on how to implement low cost, power, solar as everything's going more towards renewables. So from your perspective, what do you think would be the best way for a minor to actually implement solar energy as their power source for their mining facility?

David Magid (35:15):

Yeah, no, I think that's a great question. And, uh, I could certainly see, you know, that being an item that's going through, um, you know, constantly, you know, operators of these mining facilities, mine, you know, about where that energy source and how to actually implement, you know, solar technology. And I think there's a few different ways to do that. Just like anything else there's, you know, a few different ways, ways to, to skin the cat, I guess, as they say. Um, but the, uh, the first item that you could do is an OnSource resource. Um, so depending on the location of where your mining facility is, you know, you can, you know, if you have the acreage, um, and you're in a vacant land, you know, scenario that's rural, you know, put up a field, you know, actually have the onsite solar equipment, you know, generating that facility and that solar equipment would get then go ahead and provide electricity, you know, to, you know, your, your facility right then and there.

David Magid (36:09):

Um, it is really driven by policy at the same time. So if I was looking at a mining facility, I would a go through my basic due diligence of what I'm looking at. Um, what other characteristics aside from energy, and then kind of overlay the energy aspect of that. You know, so net metering is a, a compensation mechanism of how onsite solar, you know, could be, you know, compensated. And the way that that works is if you generate more energy than you're consuming, which probably would not even occur with these facilities, it could go back in the grid. But, um, you know, so that's one way that it would operate is you can actually reduce, you know, the electricity, you know, consumption, but, um, just to kind of clarify that question more so on average, how big is a mining facility? How many, like Meg, how many megawatts?

Will Szamosszegi (36:54):

It really depends on how big of a scale you're going for and, uh, how much capital you have for the facility. Because the physical footprint, I, I would say is one of the biggest differences between solar and these mining facilities. You can get on just a handful of acres, uh, facility that'll consume upwards of 25 megawatts, uh, which is just, oh, wow, crazy. Cause it's absolutely nuts. The density of compute is extremely, extremely high. Um, then it just kind of comes into effect how much capital do you have to deploy into those, uh, into the mining facility to be able to fill it out, purchase the miners and run it.

David Magid (37:36):

That really, that helps answer the question. So the two solutions that I would recommend is either a, you have onsite solar, you use the solar panels, reduce, you know, the amount of electricity that you're getting from the grid. You're not gonna limit it just because of the capacity of space that you have versus the usage. So you have solar onsite. You, you reduce it. Now, if you want that scenario to occur, the things you should consider is you're most likely gonna have to obviously purchase that equipment and include that into your, your PROFOR or your model, you know, of purchasing, you know, the solar equipment. And, uh, you know, although the, the payback, you know, will, will be great, you know, depending on, you know, where you're located, uh, there is some tax benefits, you know, that are gonna come into place, some tax credits and depreciation.

David Magid (38:19):

So that's one thing you wanna research of, how can you use these tax credits and tax benefits? Um, you know, so that's, you know, I'll, I'll leave right there and that's, that's option a, um, option B, which may be a little more practical and, and, and may be, it could be more beneficial is, you know, buying that solar energy, you know, from another solar facility, you know, that is located offsite. And, uh, you know, that solar facility can basically move that electricity, you know, through the grid and have it delivered, you know, to, you know, whatever node your, uh, your mining facility, you know, electrically is, is located. So that's the second option. And that option, you know, you would not have an initial capital expenditure, which could be beneficial, you know, depending on, like you said, the amount of capital you have and what you're spending on your mining facility, cause maybe you'd rather put that money into, into, you know, the mining equipment instead of solar.

David Magid (39:11):

Um, and that scenario you would purchase the electricity, you know, at a specific rate, you know, per, you know, killt hour or megawatt hour, you purchase that specific energy. Um, and depending, you know, what your objective is, you know, that energy can just be purchased as pure electricity, you know, or you can purchase that energy with, uh, an environmental attribute, which is always attached towards solar. Um, you know, so that's kind of option B and that option is, is, you know, does not require a, a capital investment. So I don't know if that kind of shared any color on the, on the question.

Will Szamosszegi (39:44):

Yeah. I mean, that helps in, in terms of the, the cost that come into play from being able to power your mining facility. Is there, like what type of range in terms of power pricing, like all in cost per kilowatt hour, would they be looking at if they go with a solar, um, with solar as their, as their power source,

David Magid (40:05):

The variables that I would have to say, you know, cause I'm gonna put the variables out there first is, and are you talking about onsite or

Will Szamosszegi (40:10):

Offsite? Whichever one you think would be more economically, uh, I guess competitive,

David Magid (40:15):

It's gonna vary depending on where you are, you know, so I think that's, that's the one piece where you are, and then it's also gonna depend on if you can get the tax credits. So I would, if I was like analyzing this, I would have like a series of questions. Like, can you use the tax credits? And if the answer is yes, then I would like further go down and, you know, look at the cost of solar panels, which on average to cost to purchase the solar equipment, we look at everything on a per lot basis. Um, so to install like a solar, you know, solar farm or solar facility, you let's just call it a dollar 25 per lot, you know, so you take that per lot and, you know, whatever, you know, size solar system, you have one megawatt, two megawatts, whatever that is, you'll multiply those two figures.

David Magid (40:58):

And then any incentives you have, you know, from a local level would get deducted and then you'll get a, a tax credit, you know, as well too, you know, which is, you know, currently about 26%, uh, of that cost, you'll get back in a, in a tax credit and then you get some depreciation. So that's kind of how that would work, you know? So there'd be initial capital expenditure to your point. You want to figure out a per kilo an hour price, right? So the way that you'd figure out a per kilo an hour price is you would have, what's called the levelized cost of energy. I don't know if that term's used in your industry at all in the industry at all. No,

Will Szamosszegi (41:36):

Not, not very

David Magid (41:37):

Often. Levelized cost levelized cost of energy. You know, the way that I would calculate that is I would take the total cost of my solar farm. Right. And, you know, so let's say it costs, uh, a million dollars just putting, making numbers out there. And then I would take out, you know, how much energy that solar farm is gonna generate, you know, every year and then multiply it by the lifespan. So I know it produces a hundred thousand dollars a year and then I take a hundred thousand dollars a year and multiply it by 35 years, you know, cuz it's gonna be operational for 35 years. Yeah. I take that number and I divided by my capital expenditure and that equals levelized cost of energy, you know, which could end up being, you know, two, 3 cents, you know, per kilowatt hour, you know, something like that. Um, and that's how you calculate your levelized cost of energy.

Will Szamosszegi (42:26):

Wow. That's interesting. Yeah. That's the first time I've heard that explained. I'm have to go and run through that a couple of times. So when, when you're planning this out, let's say that you're a minor and you want to, you want to take that type of approach and you're, I mean, there, there's a really long time span for, for the, uh, for the power there 35 years. Um, what type, what type of length PPAs do you think these minors should be going and, and trying to procure when they're speaking with, uh, with energy companies or solar companies.

David Magid (42:58):

Yeah. So great point that you brought that. And I think that's like a good segue into like the option B you know, which is that PPA model, which does not require them to, uh, you know, make any initial capital expenditure, but you're really just, you know, kind of buying a commodity at that point. Um, just like any other like supply of energy, but you're just buying it from solar. So on a PPA, you know, basis, you know, right now just like anything else, you know, we're getting, you know, timeframes are getting shorter. Um, traditionally in our industry, you know, people are looking for, you know, 20, 25 year PPAs and you know, we're still signing those up. Um, you know, but there's definitely a big trend, you know, towards shorter contracts. Uh, you're seeing contracts, you know, that are, you know, 10 years and I've heard of contracts, you know, under that haven't seen them, but I hear people talking about 'em so I don't know if they're sure or not <laugh> um, you know, but you know, 10 years, 15 years, you're seeing more and more of contract terms like that, you know, for solar, um, that are popping up, you know, maybe you'll see something shorter.

David Magid (43:58):

I don't know. Um, you know, people talk about that. So that kind of gives an idea of the duration, you know, of a, of, of a contract term for a PPA.

Will Szamosszegi (44:07):

You, you're obviously very aware of, uh, crypto blockchain, everything that you've been speaking about here, but from the people that you're speaking with, I'm curious, are other people in your industry really aware of, uh, what's going on in crypto mining or talking about it at

David Magid (44:22):

All? I mean, it's something you'll see on like a LinkedIn posting of just like, Hey, this, you know, this is being done, you know, and you hear about it. And I feel like you don't really see it. Right. So you hear about like that one project or something's going on or something's being planned, but you don't see it like actually being done in practice. Um, but it sounds, you know, obviously it sounds like it makes perfect sense and you know, like, I mean, it's, it's, it sounds so natural. Um, honestly, I actually almost think that the, your point of utilizing it as a storage, you know, facility, the mining facility, I actually think that that's number one and this would be like secondary. I think solar would be secondary. I think your option would be my preference because I feel like that's more like efficiency right.

David Magid (45:03):

And optimization asset optimization, um, in your approach. So, um, yeah, I mean, and I think part of the barriers of why we're not seeing this so much is usually with these, these PPAs entering into these power purchase agreements, uh, most, you know, uh, solar developers and, and, and solar organizations, you know, they're usually these solar projects are, are being financed, um, usually with institutions and it can be very challenging, you know, for a deal to get financed and they look, who's buying the power, you know, are they an investment grade entity? You know, what are they rated at? You know, and everyone, you know, wants to have those aspects and then you get into a credit risk. All right. So, so mine facility, so, you know, to your point, you know, Bitcoins, you know, 65,000, you right now, what happens, you know, they're gonna look at the downside. It doesn't make sense there. So I think to get into that world, you really gotta, you know, have a good credit profile as a mining facility. Um, which, I mean, I feel like there has to be PO if you pull the piece puzzle should be maybe wouldn possible to protect your downside kind like you were, you were discussing really.

Will Szamosszegi (46:13):

Yeah. Well that, that's interesting to, to hear your, uh, your thoughts on that, cuz that's something that I'm always wondering, feel like a lot of times when I'm speaking with these guys and many times we're the first, uh, mining company that they've spoken with. So it's a lot of diving through the mechanics, just kind of how you ran through everything on the solar side and the mechanics behind that. We're doing it on the flip side with the mining. So it's, it makes sense actually, the, the way that you, you laid it out though, how, uh, it's there, people are aware of it. They might see some LinkedIn posts, but it's not like everyone's seeing all these mining facilities popping up on site by the power production or anything.

David Magid (46:51):

So we could change that. I mean, I think it's, I think it's there. I think that, you know, the technology's moving and I think, um, you know, to your point, you know, 12 years, <laugh>, it's not a long time, you know, so the industry is still growing a lot, you know, the solar industry is still evolving. Um, so I share that vision with you of that, that network, um, with electric vehicles and, you know, with smart grid technologies and, you know, be able to, you know, control all these different assets, you know, to make them as efficient as possible. Um, and getting away from, you know, a grid that was, you know, built a hundred years ago, um, you know, for, for one reason. And, um, so I, I do see a lot of value in that.

Will Szamosszegi (47:31):

Yeah. Well, David, this has been so fun. Thank you for your time and coming on and really sharing all this great wisdom with the audience. I think that I, I personally learned a lot and I know that, uh, every minor out there who listens to this is gonna be very grateful that they did. So thanks again, before we sign off, where should anyone who is listening, who wants to connect with you or the company, where can they find you online?

David Magid (47:55):

Thank you so much, you know, absolutely a pleasure, you know, great shopping up with you today. Um, I feel like we could, you know, kind of keep going at it and, um, you know, so definitely you appreciate it and, uh, you know, awesome podcast that we have here. So, um, but yeah, you know, to answer your question, LinkedIn, great way to connect, um, you know, so feel free, you know, to, to go there, follow the organization, why ISG, solar, and, um, yeah, talk to you soon.

Will Szamosszegi (48:22):

Sounds great. Thanks again. Thank you for listening to this episode of the SAS mining podcast. Be sure to follow us on social media and YouTube for the latest updates and previews of upcoming episodes, full episodes and transcripts can be found on SaaS mining.com every Thursday. If you want to hear us interview a particular guest on a future episode, please reach out to us@podcastatsamining.com.

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