Bitcoin miners can be used as energy tools to solve many energy problems.
This opinion editorial is by Jaran McLean, an analyst at Arcane Research, focusing on Bitcoin mining.
Many people view bitcoin miners simply as another energy-intensive business. But there's one major difference. Bitcoin miners have unique flexibility regarding where and when they consume energy. Arcane Research's "How Bitcoin Mining can Transform the Energy Industry" report found five unique factors that make bitcoin miners energy consumers. I will discuss them here.
Bitcoin miners are price-responsive energy consumers
An energy consumer that is price responsive will be financially incentivized and able to adjust its energy consumption according to the energy price. Bitcoin miners convert energy into bitcoin, and are financially incentivized only if the price of the energy input is lower than the output.
Below is a chart showing the break-even energy price for mining bitcoin in 2021 and part of 2022. The dollar-denominated income per megawatt hour of energy that is fed into a bitcoin mining device (Antminer s19) is the break-even energy price. Let's say that the bitcoin miner's price for each MWh rises above this level. The miner would be financially motivated to shut down its machines if it earned less from bitcoin mining energy than it would have paid for it.
Source: Hashrate Index
Because energy is such an important component of the cost structure miners pay close attention to energy prices and can calculate their breakeven energy prices with confidence. In times of energy shortage, the spot price for energy will rise much higher than the miners' breakeven energy price. This encourages miners to reduce production and allow energy to flow to consumers that are more price sensitive, such as households.
Bitcoin Mining Is an Interruptible Process
Bitcoin miners are financially incentivized not only to stop using energy when spot prices rise above their break even energy price but also because of the interruption nature of bitcoin mining.
Bitcoin miners can stop its production or energy consumption at any time without losing more than the alternative cost of producing bitcoin. It can interrupt its consumption and granularly adjust it in kilowatt increments.
Comparing a bitcoin mining facility with a traditional data center reveals the disruption caused by bitcoin mining. A traditional data center must perform many complex tasks and maintain its uptime for customers. Data centers are classified from tier one through four according to their uptime guarantees, power redundancies and uptime. Bitcoin miners and other high-performance computing processes are the only data center processes that can be interrupted.
Bitcoin mining is an interuptable and price-responsive load. This makes it a very useful demand response tool that can be used to strengthen electricity systems.
Bitcoin Mining Operations are Location-Agnostic
The majority of energy-intensive industries make physical products that need to be connected to supply chains. Bitcoin miners, on the other hand produce hashes that can be sold over the internet. A bitcoin mining facility can be constructed in almost any area that has access to cheap electricity and the internet.
Bitcoin mining's location agnosticism makes it possible for the energy consumer to go directly to the source of the energy. Bitcoin miners are the ultimate consumers of previously stranded resources. This is why oil producers started using natural gas to extract bitcoin.
Source: Arcane Research
A map of Texas' bitcoin mining operations reveals the location agnosticism. They're almost all found in the desert west of Texas, where they rely on the region’s stranded solar and wind.
Bitcoin Mining Operations can be scaled modularly
Each bitcoin mining machine uses a certain amount of electricity. It is possible to combine different amounts of machines into different levels. It doesn't matter if an energy asset owner needs a bitcoin mining load of 5, 20, or 100 MW. All sizes of load can be achieved by changing the number machines.
Source: Arcane Research
Because bitcoin mining is modular, it's possible to create a bitcoin mining load that matches the available energy generation capacity. This is particularly important when comparing the bitcoin mining load to the excess production capacity of an stranded renewable generator in order to increase its economics.
An operation for Bitcoin mining can be made portable
To maximize portability, we can create a bitcoin mining load that is specifically designed. As a way of optimizing portability, specially designed shipping containers have been developed. These containers are easy to ship to other places if required.
Source: Arcane Research
Bitcoin mining is portable, so it's easy to move your mining facility. If you have excess energy, you can quickly move the facility from one location to another.
Bitcoin mining has a unique combination of properties that make it an energy consumer. This flexibility allows bitcoin miners provide positive externalities to different energy systems worldwide, such as strengthening vulnerable electricity grids and improving the economics for renewable energy. They can also mitigate natural gas flaring, lower heating costs, and reduce natural gas flaring.
Bitcoin mining is a promising energy tool. It's not just that it's an extremely flexible energy consumer, but also that there are financial incentives that make it attractive. The energy and bitcoin mining industries will work together to solve our most pressing energy problems. Arcane Research has published a full report on this topic.
Jaran Mellerud contributed this guest post. These opinions are not necessarily those of BTC Inc.
By: Jaran Mellerud
Title: Five Factors Making Bitcoin Miners Unique Energy Consumers
Sourced From: bitcoinmagazine.com/business/five-factors-making-bitcoin-miners-unique
Published Date: Sat, 17 Sep 2022 00:30:00 GMT
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