How Bitcoin Mining Can Help Power Companies Optimize Generation Values

Bitcoin mining is the process used to generate new coins and verify new transactions. The process involves large, decentralized networks of computers around the world that verify and secure blockchains, the virtual ledgers that document cryptocurrency transactions. In return for contributing their computing power, miners are rewarded with new coins. The process ultimately requires a lot of energy to carry out, and this is where the power companies come in.

“Bitcoin mining can help the energy sector,” said Andrew Webber, founder and CEO of Digital Power Optimization (DPO), as a guest at The POWER podcast. “Rather than just selling power to third-party Bitcoin miners, we suggest that in many cases the energy companies are actually far better positioned to build their own Bitcoin mines and carry out this strategy and this activity for their own purposes in a vertical space. integrated way, where again, the energy company owns the Bitcoin mine. And by running a Bitcoin mine, in conjunction with an energy asset, in an intelligent and thoughtful way, you can really optimize your generation assets in a way that you really couldn’t have without a tool like Bitcoin mining to help you.”

Webber said the idea came to him while reading a newspaper article. “I read [a Los Angeles Times] article about the state of California paying the state of Arizona $20 per megawatt hour to get rid of all the power. And I said, ‘What’s going on? It seems completely crazy to me. I’ll take everything. You know? I want to set up a Bitcoin mine there and just, whatever 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 alleviate problems. “This is a mechanism that can go almost anywhere and soak up this excess available power where it’s produced, and then use that value elsewhere around the globe in a way that actually solves these problems,” Webber said. “So, it’s a pretty interesting tool for the energy sector once they understand how this will help.”

Bitcoin mining also offers flexibility. If electricity is suddenly needed for customers, the power company can respond by simply shutting down mining operations. “You can just turn it off, and then it’s a very good tool for responding to sharp jumps 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 resources 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 40-foot by 8-1/2-foot metal box. Inside are racks, cables, all the networking equipment, a filtration system, cooling fans and 300 to 325 highly specialized computers. The container is connected to a transformer supplied with 240-V or 277-V power, and mining can begin on whatever schedule works best for the utility, including 24/7/365.

“You put down one of these containers, five of them, 10 of them, 200 of them, whatever is required at the specific site for the specific use case,” Webber said. “And you don’t have to do everything at once either. You can scale it over time. Start with a megawatt. See that. Make sure it does what we tell you it will do. Six months later, if it’s humming and you’re happy, build another, build five more. If you like them, build 50 more. We will look at all the assets you own and find out where these can work. So you can take a step-by-step approach. You don’t have to commit to $100 million on day one. You can start slowly. DPO offers free pilots.”

Ultimately, however, Bitcoin mining is just one tool in a power management toolbox. It can be used in combination with other solutions, including battery storage and the production of green hydrogen. “All of these are things that need to be incorporated and thought about, not individually, but honestly, in concert with each other,” Webber said. “Right now, I think the energy sector has next to zero understanding that this is available to them, and that’s what we’re hoping to change. And I think it will probably be common over the next decade or two.”

To hear the full interview, which includes much more about Bitcoin mining and some concrete examples of how it is being used to optimize power generation resources in multiple locations around the world, listen to The POWER podcast. Click the SoundCloud player below to listen in your browser now, or use the following links to get to the show page on your favorite podcast platform:

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—Aaron Larsen is POWER’s executive editor (@AaronL_Power, @POWERmagazine).