If you have been on the Internet recently, you may have stumbled across the buzzwords Bitcoin, cryptocurrency or block-chain technology. Whether they make complete sense or make your head spin, not to worry. At Avolta Energy, we are focused on the power needed to “mine” this currency and the environmental impacts of generating this power. The relationship between solar and Bitcoin is multi-faceted. For example, solar powered Bitcoin mines are an excellent way to offset CO2 emissions while generating cheap, green energy for an energy intensive “mines.” But like all good things, solar does have its flaws. As renewable energy continues to become mainstream, recent increases in solar production have posed a variety of stability issues to the grid. Some of these issues can actually be alleviated by large consumers in the cryptocurrency industry. Moreover, we strongly urge “miners” to consider an investment in solar energy. This investment will reduce CO2 emissions, open new revenue streams and contribute to grid efficiency.
Disclaimer: The mention of ‘Bitcoin’, capital B, in this article refers to the company and brand. Any mention of ‘bitcoin’, lower-case b, refers to the coins and currency.
Bitcoin Overview
Bitcoin is a type of cryptocurrency, or digital currency, used like any other currency to buy goods and exchange services. As a digital currency based on blockchain technology, Bitcoin uses an online ledger shared across users to ensure secure transactions. Bitcoin is based on a principle of decentralization, an increasingly important principle being applied to the electric grid. To complete a transaction there is no need for a bank or intermediary: the exchange is peer-to-peer.
The industry term for acquiring bitcoin is “mining.” This process involves one or more computers, computing billions of calculations per second to solve a numeric puzzle. There is a common misconception that mining requires advanced math. In reality, mining requires guesswork on the order of trillions, and completing that amount of calculations is what makes it so energy intensive. In addition to beating incredible odds, you must also be the first one to do so to mine a bitcoin. Once a valid “hash” is mined, it is used to secure the bitcoin’s place in the blockchain and mint a new coin. As more bitcoins are mined the Bitcoin algorithm is programmed to get more difficult, requiring more processing power per bitcoin.
Energy Consumption
Bitcoin began in 2009 under the anonymous guise of Satoshi Nakamoto. Since then, Bitcoin has undergone exponential growth as an open-source protocol. As mines move from garages and basements to state-of-the-art warehouse facilities, the costs and intricacies of operating mines has grown in tandem. Bitcoin mines not only power computers rigs but also keep them from overheating, overall a heavily energy-consuming process. Miners must heed the balance of the cost of power and the number of bitcoins mined per unit power. Researchers at Cambridge University estimate that to mine Bitcoin, over 120 terawatt-hours (TWh) of energy is used every year. That means if Bitcoin were its own country, it would rank in the top 30 energy consumers worldwide. In April 2021, industry leaders joined the Crypto Climate Accord, an effort to make the industry’s energy consumption 100% renewable by 2030. Solar will certainly play a major role in this transition
Source: https://www.bbc.com/news/technology-56012952
Solar Powered Bitcoin Mines
Solar is a sustainable and environmentally conscious way to mine Bitcoin, yes, but the benefits of solar are also monetary. Consider a solar powered bitcoin mine. If the system capacity meets the needs of the mine, once a system returns its original investment the cost of mining becomes virtually “free.” While of course there are upgrade and maintenance costs, these expenses don’t quite compare to utility bills. The profitability of a mining operation relies heavily on the cost of electricity. It can be helpful to mind that bitcoins fundamentally begin as energy and profits derive from the conversion rate of energy to bitcoin. By minimizing utility costs with an investment in solar, mine owners are essentially locking in on years of cheap-utility mining.
Solar Growing Pains
Solar production is on the rise. In these energy markets, grid managers are seeing an increase in the mismatch between peak hours of solar production and peak demand hours. Solar panels produce the most energy mid-day, and the peak hours of demand occur just after sundown. When there is a significant difference between energy production and demand, we get a “duck curve”.
Source: https://www.nrel.gov/docs/fy16osti/65023.pdf
Flexibility
This curve poses two main issues to the grid: flexibility and overgeneration. Note the height and slope of the neck of the duck. As the neck gets taller, this represents how much power must be produced to meet demand. As the neck gets steeper, this represents how fast it must generate that power. The grid must flex from ultra low to peak demand in a matter of hours. Most power plants are not optimized for these drastic shifts in production. On many grids the only way to meet this demand is to fire up fossil fuel dependent peaker-plants. Forcing power plants to scale production quickly and massively to meet demand is neither economical nor good for the environment
Overgeneration
The second issue related to the duck curve is overgeneration, or the duck’s belly. It is typical that power plants will have agreements with utility companies to ensure a baseline amount of power to the grid. When solar generation on the grid is so great that demand dips below this baseline, there is too much energy on the grid. Solar plant managers are forced to curtail generation and turn off panels to avoid overload and damage to the grid. Put simply, there is more supply than demand. Without robust battery storage there is no use for this energy so it is ultimately lost
Source: https://www.nrel.gov/docs/fy16osti/65023.pdf
Grid Relief
Bitcoin abates these issues of flexibility and overgeneration. Due to the scale at which Bitcoin consumes energy, mines have become important players on the grid. This stature comes with great power (pun intended), namely the ability to meet Demand Response (DR) and a newer concept known as “Supply Response” (SR).
Source: https://kts-intek.com/smart-energy/demand-response/
Demand Response
Demand Response is when a consumer shifts their use of energy-consuming assets to off-peak hours, receiving financial incentive to do so. This decreases the overall demand and in turn, allows renewable sources like wind and solar to power a greater percentage of the demand load. A DR request will consist of a utility provider asking users to ramp down or shift energy-intensive operations to different times of the day. This option is not available for energy consumers, nor is it straightforward. The granular structure of a Bitcoin mine allows owners to quickly and easily respond to specific DR requests.
Mines can turn off computers or ramp down 20% of real-time processing power with a few lines of code. Even though they must ramp down production, they are receiving financial compensation from their utility in return. When the rate ($/kWh) provided by the utility provider is greater than the value of the bitcoins mined ($/kWh), it makes financial sense to respond to the request from their utility
Supply Response
“Supply Response” (SR) is a new concept in the energy industry put forward to help with overgeneration. As more renewable energy sources penetrate the grid, the amount of overgeneration (or the duck’s belly) continues to grow. With excess amounts of energy being produced, a scenario arises where energy prices can drop into the negative. Interestingly, it can be more economical for the utility company to pay consumers to consume the extra energy than to actually ramp down generation. Historically the discussion regarding energy savings has been centered around decreasing demand, though this is quite the opposite. Supply response creates a need for a new energy customer profile, targeting consumers with versatile and instantaneous capabilities to increase consumption. Bitcoin miners fit this profile well. When requested, miners can throttle up operations and maximize computing power while being paid to do so.
Takeaways
Cryptocurrency mining opens an intense but lucrative business model for solar. From the perspective of the grid, Bitcoin mines behave as virtual batteries that can be charged or discharged at a moment’s notice. From the perspective of a mine, ramping up and down mining according to the grid’s needs is purely a numbers game. More often that not, there is financial incentive to respond to requests from utility operators. As the modern grid continues to develop and conform to technology advancements, energy intensive businesses like cryptocurrency mines must be strategic about their consumption. Solar allows miners to take advantage of natural energy resources while making money and supplying services to utility grids when they need it most.
If you’re avid Bitcoin miner or hadn’t heard about cryptocurrency before today, thank you for reading this far! At Avolta Energy we are constantly helping customer find solar solutions for their energy needs. Whether your business consumes as much energy as a Bitcoin mine or you’re simply looking to add a few panels, please reach out! We would love to help you join the green revolution. To discuss more about integrating a solar system