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 return for contributing their computing power, miners are rewarded with new coins. The process ultimately requires a lot of energy to perform, which is 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 power to third-party Bitcoin miners, we suggest, that, in many circumstances, energy companies themselves are actually far better positioned to build their own Bitcoin mines and undertake this strategy and this activity for their own purposes in a vertically integrated way, where again, the energy company owns the Bitcoin mine. And by operating 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 couldn’t really have done without a tool like Bitcoin mining to help you.”
Webber said the idea came to him while reading a story in the newspaper. “I was reading [a Los Angeles Times] article about the state of California paying the state of Arizona $20 per megawatt-hour to get rid of all of its power. And I said, ‘What is going on? That seems absolutely crazy to me. I’ll take all of it. You know? I’ll set up a Bitcoin mine there, and just, any power you don’t want, just send it to me, I’ll take it for free,’ ” he said.
Webber explained how Bitcoin mining can help power companies alleviate issues. “This is a mechanism that can go almost anywhere and soak up this excess available power where it’s produced, and then apply that value elsewhere across the globe in a way that actually solves these problems,” said Webber. “So, it’s quite an interesting tool for the energy sector once they get their heads around how this will help.”
Bitcoin mining provides flexibility, too. If power is needed suddenly for customers, the power company can respond by simply shutting down the mining operation. “You can just turn it off, and so, it makes a really good tool to respond to sharp jumps in demand or transmission difficulties,” Webber said. “It’s sort 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 fairly simple. Webber said a 1-MW system fits in what looks like a standard shipping container—essentially, a 40-foot by 8-1/2-foot big metal box. Inside are racks, wiring, all the networking equipment, a filtration system, cooling fans, and 300 to 325 very specialized computers. The container is connected to a transformer supplied by 240-V or 277-V power, and mining can begin on whatever schedule works best for the power company including 24/7/365.
“You put one of these containers down, five of them, 10 of them, 200 of them, whatever is called for on that specific site for that specific use case,” said Webber. “And you don’t have to do it all at once either. You can scale it over time. Start with a megawatt. Watch it. Make sure it does what we tell you it’s going to do. Six months later, if it’s humming along and you’re happy, build another one, build five more. If you like those, build 50 more. We’ll go look on every asset you own and figure out where these might work. So, you can take a phased approach. You don’t have to go commit to $100 million of spend on day one. You can start slowly. DPO offers free pilots.”
In the end, 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 green hydrogen production. “All of these are things that need to be incorporated and thought about, not individually, but frankly, in concert with one another,” said Webber. “Right now, I think the energy sector has close to zero understanding that this is available to them, and that’s what we’re hoping to change. And I think it’ll be probably commonplace 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 assets in multiple locations around the world, listen to The POWER Podcast. Click on the SoundCloud player below to listen in your browser now or use the following links to reach the show page on your favorite podcast platform:
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—Aaron Larson is POWER’s executive editor (@AaronL_Power, @POWERmagazine).