FIVE FACTORS MAKING BITCOIN MINERS UNIQUE ENERGY CONSUMERS

Bitcoin miners are uniquely flexible energy consumers we can use as energy tools to help solve several energy problems.

Most people overlook bitcoin miners as simply yet another energy-intensive industry, but there is one key difference: Bitcoin miners are highly flexible concerning when and where they consume energy. Arcane Research's latest analysis titled "How Bitcoin Mining Can Transform the Energy Industry" revealed five reasons making bitcoin miners unique energy consumers, which I shall describe below.

BITCOIN MINERS ARE PRICE-RESPONSIVE ENERGY CONSUMERS

A price-responsive energy consumer is financially incentivized to alter its energy use based on the energy price. Bitcoin miners refine energy into bitcoin and are only financially driven to do this if the energy input is priced lower than the bitcoin output.

The chart below illustrates the break-even energy price of mining bitcoin during 2021 and parts of 2022. This break-even energy price is the dollar-denominated income per MWh of energy fed into a bitcoin mining machine (Antminer S19) (Antminer S19). Suppose a bitcoin miner's price per MWh increases over this line. In that instance, the miner is financially encouraged to turn off its machines as it would earn less by using this energy for bitcoin mining than it would pay for the energy.

Since energy is such a key component of the cost structure, miners always pay attention to their energy prices and can calculate their break-even energy prices with certainty. During energy shortage situations, the spot energy price will increase significantly higher than miners' break-even energy price, motivating miners to halt production and allow the energy flow to less price-responsive energy customers, including households.

BITCOIN MINING IS AN INTERRUPTIBLE PROCESS

Not only are bitcoin miners financially driven to cease consuming energy if spot energy costs climb over their break-even energy price, but they are also completely able to do so due to the interruptible structure of the bitcoin mining process.

A bitcoin miner can cease its production and energy consumption at a moment's notice without losing more money than the alternative cost of not creating bitcoin. It can not only stop its usage but also granularly alter it up or down in kilowatt increments.

The interruptibility of the bitcoin mining process becomes apparent when comparing a bitcoin mining operation to a normal data center. A traditional data center performs several complicated procedures and must maintain uptime due to its customers. Uptime is so critical for data centers that they are graded from tier one to four depending on their uptime assurances and power redundancy. Bitcoin miners, and several other high-performance computer activities, are the only interruptible data center processes.

Since bitcoin mining is an interruptible and price-responsive load, the process is especially ideal as a demand response mechanism that can help strengthen power systems.

BITCOIN MINING OPERATIONS ARE LOCATION-AGNOSTIC

Most energy-intensive companies create physical products that require access to supply chains. On the other hand, Bitcoin miners produce hashes sold on the internet. Therefore, a bitcoin mining plant may easily be erected in any place with inexpensive electricity and internet connection.

The location agnosticism of bitcoin mining makes it possible to take the energy consumer directly to the energy supply. Bitcoin miners are the final buyers of previously stranded energy resources, which is why oil producers have started to use natural gas that they otherwise would flare to mine bitcoin.

The location agnosticism of bitcoin mining becomes obvious when looking at a map of Texas' bitcoin mining operations. They are almost all located in the desert in the far west of the state, where they feed on the region's stranded wind and solar.

BITCOIN MINING OPERATIONS CAN BE SCALED MODULARLY

A bitcoin mining equipment requires a set quantity of electricity, and it's possible to combine varying amounts of these units into different levels of load. Whether an energy asset owner desires a bitcoin mining load of 5 MW, 20 MW, or 100 MW doesn't matter: All load sizes are attainable by adjusting the number of machines.

The flexibility of bitcoin mining makes it easy to construct a bitcoin mining load to meet the existing energy generation capacity. This is especially essential when aligning the bitcoin mining demand with the extra output capacity of a stranded renewable energy generation to improve its profitability.

A BITCOIN MINING OPERATION CAN BE DESIGNED TO BE PORTABLE

We can construct a bitcoin mining load in specific ways to maximize portability. Filling specifically constructed shipping containers with mining gear has lately developed as a strategy to maximize portability. These container solutions are developed following the plug-and-play principle and may quickly be transferred to different sites if needed

The portability of bitcoin mining makes it easy to transfer a mining facility to soak up excess energy and swiftly move the facility to another area if the energy ceases being in excess in the first site.

CONCLUSION

Bitcoin mining offers a combination of properties that makes it a very adaptable energy consumer. This flexibility allows bitcoin miners to give positive externalities to many energy systems globally, including reinforcing weak power grids, boosting the economics of renewable energy, decreasing natural gas flaring and cutting heating costs by repurposing waste heat.

What makes bitcoin mining such an attractive energy instrument isn't merely that it's a very adaptable energy consumer but that the financial incentives mount up. With comparable incentives, the bitcoin mining and energy businesses are bound to work together to address some of our largest energy concerns. You may learn more about this in Arcane Research's entire report