Crusoe Energy Tackles Cryptocurrency and Data Center Power Consumption and Greenhouse Gas Emissions

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The two founders of Crusoe Energy believe they have a solution to two of the biggest problems facing the planet today: the growing energy footprint of the tech industry and the greenhouse gas emissions associated with the fuel industry. natural gas.

Crusoe, which uses excess natural gas from energy operations to power data centers and cryptocurrency mining operations, has just raised $ 128 million in new funding from some of the biggest names in the industry. venture capital to expand its operations – and the timing could not. t be better.

Methane emissions are emerging as a new area of ​​interest for researchers and policy makers focused on reducing greenhouse gas emissions and keeping global warming within Target 1, 5 degree set in the Paris Agreement. And those emissions are exactly what Crusoe Energy captures to power its data centers and bitcoin mining operations.

The reason tackling methane emissions is so critical in the short term is that these greenhouse gases trap more heat than their carbon dioxide counterparts and also dissipate faster. So dramatic reductions in methane emissions can do more in the short term to alleviate the pressures of global warming that human industry is putting on the environment.

And the biggest source of methane emissions is the oil and gas industry. In the United States alone, about 1.4 billion cubic feet of natural gas is burned daily, said Chase Lochmiller, co-founder of Crusoe Energy. About two-thirds of it is burned in Texas, and an additional 500 million cubic feet is burned in North Dakota, where Crusoe has focused its operations to date.

For Lochmiller, a former quantitative trader at some of America’s leading financial services institutions, and Cully Cavness, a third-generation oil and gas offspring, the ability to capture natural gas and harness it for IT operations is a natural combination of the interests of the two men. in financial engineering and environmental conservation.

NEW TOWN, ND – August 13: View of three oil wells and natural gas flaring on the Fort Berthold Indian Reservation near New Town, ND on August 13, 2014. Approximately $ 100 million in natural gas is burned per month because ‘A pipeline system is not yet in place to capture and transport it safely. The three affiliated tribes of Fort Berthold represent the Mandan, Hidatsa and Arikara nations. It is also at the epicenter of the fracking and oil boom that brought oil royalties to large numbers of Native Americans who live there. (Photo by Linda Davidson / The Washington Post via Getty Images)

The two Denver natives met in prep school and remained friends. When Lochmiller left for MIT and Cavness went to Middlebury, they had no idea that they were eventually going to start a business together. But thanks to Lochmiller’s exposure to large-scale computing and the financial services industry, and the family business’s Cavness Hypothesis, they came to the conclusion that there had to be a better way. to treat the massive waste associated with natural gas.

The conversation around Crusoe Energy began in 2018 when Lochmiller and Cavness went to climb the Rockies to talk about Lochmiller’s trip to Mt. Everest.

When the two began to grow their business, the initial goal was to find an environmentally friendly way to manage the energy footprint of Bitcoin’s mining operations. It was this speech that caught the attention of investors at Polychain, the investment firm founded by Olaf Carlson-Wee (and former Lochmiller employer), and investors like Bain Capital Ventures and new investor Valor Equity. Partners.

(This was also Lochmiller’s speech to me to cover the company’s round table. At the time, I was skeptical of the company’s premises and worried that the company was just a Another way to extend the use of hydrocarbons while supporting a cryptocurrency. which had limited real use beyond speculative hedging against government collapse. I was wrong on at least one of these assessments. )

“When it comes to sustainability issues, Crusoe has a clear standard to only pursue projects that net reduce emissions. Typically, the wells that Crusoe works with are already flared and would continue to do so in the absence of Crusoe’s solution. The company refused. many projects where they would be a low cost buyer of gas from a traditional pipeline because they explicitly don’t want to be net adders of demand and emissions, ”a Valor Equity spokesperson wrote in an email. . “In addition, mining is moving more and more towards renewables and Crusoe’s approach to stranded energy may provide better economics for stranded or marginalized renewables, ultimately bringing more money. renewable energies in the mix. Mining can provide an interruptible base demand which can be reduced as grid demand increases, thus the overall effect of encouraging the addition of more renewable energy sources to the grid. “

Other investors have since piled up, including: Lowercarbon Capital, DRW Ventures, Founders Fund, Coinbase Ventures, KCK Group, Upper90, Winklevoss Capital, Zigg Capital and Tesla co-founder JB Straubel.

The company now operates 40 modular data centers powered by natural gas otherwise wasted and flared. North Dakota, Montana, Wyoming and Colorado. Next year, that number is expected to increase to 100 units as Crusoe enters new markets such as Texas and New Mexico. Since launching in 2018, Crusoe has become a scalable solution to reduce flaring through energy intensive computing, such as bitcoin mining, graphics rendering, artificial intelligence model training, and even folding simulations. of proteins for COVID-19 therapeutic research.

Crusoe claims 99.9% combustion efficiency for its methane and also brings additional benefits in the form of new networking of its data center and mine sites. Ultimately, this networking capacity could lead to increased connectivity for the rural communities surrounding the Crusoe sites.

Currently, 80% of the company’s operations are used for bitcoin mining, but there is a growing demand for use in data center operations, and some universities, including MIT’s Lochmiller alma mater. , review the company’s offerings for their own IT needs.

“It’s really in an incubation phase right now,” Lochmiller said. “A private alpha where we have a few test clients … we’ll make it available for public use later this year.”

Crusoe Energy Systems is expected to have the lowest data center operating costs in the world, according to Lochmiller, and while the company will spend money to support building the infrastructure necessary to deliver data to customers, those costs are negligible compared to power consumption, Lochmiller said. .

The same goes for bitcoin mining, where the company can offer an alternative to coal mining operations in China and building new renewable capacity that would not be used to serve the network. As cryptocurrencies seek a way to blunt criticism of the energy consumption involved in their creation and distribution, Crusoe becomes an elegant solution.

Favorable institutional and regulatory winds are also propelling the company forward. Recently, New Mexico passed new laws limiting flaring and ventilation to no more than 2% of an operator’s production by April of next year, and North Dakota is pushing for incentives. to support on-site torch collection systems while Wyoming signed a law creating incentives for torches. gas reduction applied to bitcoin mining. The world’s largest financial services firms are also taking a stand against flares, with BlackRock calling for an end to routine flaring by 2025.

“When we consider our energy use, we draw a very clear line in our project appraisal stage where we reduce emissions for an oil and gas project,” Lochmiller said.



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