Bitcoin mining is the process used to generate new coins and verify new transactions. The process involves vast, decentralized networks of computers around the world that verify and secure blockchains, the virtual ledgers that document cryptocurrency transactions. In exchange for their computing power, miners are rewarded with new coins. The process ultimately requires a lot of energy to operate, and that’s where power companies come in.
“Bitcoin Mining Can Help the Energy Sector,” Andrew Webber, Founder and CEO of Digital Power Optimization (DPO)said as a guest on The POWER Podcast. “Instead of just selling energy to third-party bitcoin miners, we suggest that in many circumstances the energy companies themselves are actually in a much better position to build their own bitcoin mines and undertake this strategy and this activity for their own purposes in a vertical integrated way, where again the energy company owns the bitcoin mine and operating a bitcoin mine, in conjunction with an energy asset, in a smart and thoughtful way , you can really optimize your productive assets in a way that you really couldn’t without a tool like bitcoin mining to help you out.
Webber said the idea came to him while reading an article in the newspaper. “I read [a Los Angeles Times] article about the State of California paying the State of Arizona $20 per megawatt hour to dump all of its electricity. And I said, ‘What’s going on? It seems completely crazy to me. I’ll take it all. You know? I’ll set up a bitcoin mine there, and just, any power you don’t want, send it to me, I’ll take it for free,” he said.
Webber explained how bitcoin mining can help power companies solve problems. “This is a mechanism that can go almost anywhere and take that excess available energy where it’s produced, and then apply that value elsewhere in the world in a way that really solves those problems,” Webber said. “So it’s quite an interesting tool for the energy sector once they understand how it will help them.”
Bitcoin mining also offers flexibility. If customers suddenly need power, the power company can respond by simply shutting down mining. “You can just turn it off, and so it’s a really good tool for responding to sudden spikes in demand or transmission difficulties,” Webber said. “It’s a kind of energy management infrastructure. And when you start thinking about an energy company building these things, it’s not really bitcoin mining, you’re managing your energy assets in a different way, using a different system.
Setting up a Bitcoin mining operation is quite simple. Webber said a 1 MW system fits into what looks like a standard shipping container, essentially a large 40-by-8-1/2-foot metal box. Inside are racks, cabling, all networking equipment, a filtration system, cooling fans, and 300 to 325 highly specialized computers. The container is connected to a 240V or 277V powered transformer, and mining can begin on whatever schedule is best for the power company, including 24/7/365.
“You drop one of these containers, five of them, 10 of them, 200 of them, whatever is requested on that specific site for that specific use case,” Webber said. “And you don’t have to do everything at once either. You can stagger it over time. Start with one megawatt. Look at this. Make sure it does what we tell you it will do. Six months later, if it’s buzzing and you’re happy, build another one, build another five. If you like them, build 50 more. We’re going to look at all the assets you own and figure out where they might work. So you can take a step-by-step approach. You don’t have to commit to spending $100 million on day one. You can start slowly. DPO offers free drivers.
Ultimately, however, Bitcoin mining is just one tool in a power management toolkit. It can be used in combination with other solutions, including battery storage and green hydrogen production. “All of these things need to be integrated and thought through, not individually, but frankly, in concert with each other,” Webber said. “Right now, I think the energy industry understands almost nothing that this is available to them, and that’s what we hope to change. And I think that will probably be commonplace for the next ten or twenty years.
To hear the full interview, which includes much more about Bitcoin mining and some real-world examples of how it’s being used to optimize power generation assets in multiple locations around the world, listen The POWER Podcast. Click on the SoundCloud player below to listen in your browser now or use the following links to go to the show’s page on your favorite podcast platform:
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—Aaron Larson is the editor of POWER (@AaronL_Power, @POWERmagazine).