The Dark Math Behind El Salvador’s Expensive Power And Bitcoin Mining | Josue Lopez

El Salvador is leading the world in Bitcoin adoption, but under the hood, its energy market tells a darker story. Josué López breaks down the brutal math behind El Salvador’s electricity costs and why mining Bitcoin here seems “impossible” under the current system. 

Decades of corruption and a pricing system tied to costly diesel generation reveal how El Salvador’s so-called “sustainable” energy model remains economically broken.

Watch the FULL EPISODE here:
https://www.youtube.com/watch?v=2pi80zA02J8

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Transcript

Mike Peterson: I remember when you guys made the announcement, and I thought, okay, this is just like a marketing gimmick because I've lived in El Salvador for a long time, and the electricity here is ridiculously expensive. It's one of my biggest complaints, and the climate doesn't seem great for mining either because it tends to be hot and humid.

Mike Peterson: And so I've always been perplexed that how is this economical or how can this actually work as a business? So that's why I'm excited to have you here to explain it. And I don't pretend to know the energy markets or to know mining, but just from my experience, when people would ask me and it's like, "Yeah, I think it's just like a marketing thing, I don't think it's real".

Josue Lopez: It was the usual response back then, and we were okay with, you know, the sort of media's response when we launched because they were right. I mean, there is absolutely no way that you can mine Bitcoin profitably in the third most expensive energy market in Central America, there's just no way. 

Josue Lopez: For those who know about energy prices, the energy price in El Salvador is $200 to $220 a mega-watt hours. So it's completely unfeasible. So we were okay with the response. I mean, it's ridiculous.

Mike Peterson: And you need to be more like $30, right?

Josue Lopez: Yeah, yeah. I mean, to be sort of one of the big competitive firms in the world, you need to be inside the $25 to $35 range. So, you know, it's impossible. 10% of what the retail price is in El Salvador. That's what you needed.

Mike Peterson: And even going back ten years. That was one of the complaints I heard from people in the industry here was, "Yeah, the wages are good and competitive, but the power prices are so high that any industry that consumes a lot of power is just not economical".

Josue Lopez: Yeah, they're extremely high. You know, the reason they're so high is because, you know, we have a lot of big renewable. So we have a lot of hydro, which is our main generator; about 34% of our energy is hydro.

Mike Peterson: Is that high, it's that high? Yeah, okay.

Josue Lopez: There's a lot of hydro.

Mike Peterson: And is that more recent? Is that I know they brought a new no system on and.

Josue Lopez: You know, the first big hydro, which, if I'm not mistaken, it's the Cerron Grande. I don't have the actual numbers right now, but it was built in 1955, and it was our first sort of US sponsored energy project, and we built that massive dam that flooded a big part of El Salvador. I mean, we have a very large artificial lake, called Suchitlan, and it's a dammed lake. Back then, you know, El Salvador, as in many other countries in Latin America, was flooded by corruption.

Josue Lopez: So if you had a budget of, say, $1 billion, only 20% of that would actually reach the project, and then 80% of that would just disappear through the, you know, hands of corrupt officials and other countries and so on. Or we would have to sign massive debt agreements that would essentially yield the price of that energy to be a ridiculous amount.

Josue Lopez: So we're paying the price of very expensive energy that was developed in the 50s, in the 60s. Our first geothermal plant, if I'm not mistaken, came in '75, then the second one in '92. Then, now we obviously have natural gas, which is not much better, but it is cheaper. We have our bunker generators. We have wind, we have solar, and so on.

Mike Peterson: The bunker, I mean, that's basically diesel or the low-grade diesel?

Josue Lopez: That's low-grade diesel. Very bad for the environment. Not that I'm a massive environmentalist.

Mike Peterson: But that's still a large percentage is produced that way, right?

Josue Lopez: Not anymore, but it is the last generator. And the way, you know, in a nutshell, and I mean, there is a very complicated formula to get the energy price for every individual in El Salvador. But in a nutshell, pretty much it is the price set by the most expensive and final generator. That's the price of the entire system has to pay.

Josue Lopez: Okay, so those diesel generators that are extremely inefficient and very expensive, they set the price. Because in, you know, energy's an amazing business because the economy cannot afford to make you lose. They have to make you at least break even, you know. Okay. Yeah. If not, you lose money, then you turn off your plant and no one has energy.

Josue Lopez: So the system has to ensure that those bunker plants, they make enough money so that they can continue supplying that that small portion of energy that they so supply, 8% or so. So, that's, you know, a couple of reasons why the energy price is more expensive now. This.