Could Bitcoin Mining Transform the Energy Sector?

Arcane Research has published a report by A+B showing that bitcoin mining is an asset in the fight against global warming. It subsidizes renewable energy and directly reduces methane emissions.

Short-sighted criticism of bitcoin

Bitcoin mining is facing two recurring criticisms. The first is that it would be useless…

His opponents pretend to ignore that this technological breakthrough is a valuable resource for all of humanity. A privilege usually reserved for those whose fortune allows them to buy assets immune to inflation (prestigious real estate, works of art, shares of multinational corporations, etc.).

Others refuse to accept that bitcoin miners are beneficial to energy companies. “The best energy is the one we don’t use”some say, insisting that bitcoin mining will eventually force energy companies to produce more energy.

In this report, Arcane destroys all these myths. The authors readily admit that most bitcoin mining is not yet working as described in the report. But it is clear that “BTC miners will increasingly move this way out of necessity. »

It is also true that the explosion in the price of bitcoin has made mining super profitable in 2020 and 2021. Many machines are bought and connected everywhere, regardless of the cost of electricity.

But this is an epiphenomenon: “Ignoring the cost of electricity is not a sustainable way of working for miners. » Increased competition over time will strain margins and force miners to find energy that no one wants. Evidence of this is that many miners have recently been forced to sell their BTC to weather the storm (falling BTC price and rising carbon energy price).

For a miner, the easiest way to cut costs (80% electricity) is to partner with the energy industry and/or find energy where it is literally being wasted. Typically on flood defenses where the electricity production has not yet been fully absorbed due to the demand that is not yet there. Or near wind farms.

Arcane highlighted several areas where bitcoin miners can bolster energy systems and contribute to the fight against global warming.

Strengthening power grids through bitcoin mining

Supply and demand in an electricity grid must always be in balance, otherwise a power failure will occur. Historically, supply, fueled by gas and coal, made it possible to respond very finely to variations in demand. This prevents waste. A gas-fired power station can respond very quickly to an unexpected peak in demand.

But the situation has changed. One of the biggest energy challenges today is: “to manage the loss of reactivity associated with the growing share of wind energy, an intermittent and uncontrollable source of energy. »
However, in the IEA sustainable development scenario, the percentage of wind and solar energy in global electricity production should increase from 11% in 2020 to 42% in 2040! Good or bad idea? There is no doubt that it is a godsend for bitcoin mining:

“The growth of wind and solar increases the need for flexible electricity demand to adapt to supply instability. This flexible demand for electricity is called “demand response”. [réponse à la demande]. Bitcoin mining is the cheapest industry to reduce electricity demand when needed (low cost to shut down operations). The miners also purchase electricity 24 hours a day. They absorb the renewable energy produced when there is no demand, which improves the margins of the energy companies. »

In Texas’s ERCOT system, miners provide demand response that bolsters an electric grid powered primarily by wind, solar, and nuclear. After all, nuclear power plants never stop working and wind energy often supplies electricity when it is not needed.

Here, to understand it, is the rate of electricity consumption over the course of a week:

Electricity consumption pattern over a week
Source: / Peaks in electricity demand occur in the morning and evening. When people get up, they turn on the lights, turn on the heating, take a shower, turn on the toaster, etc. Same thing when they come home from work or school. Lighting, heating, electric stove, TV, etc.

Admittedly, excess renewable energy could be stored to be reused during consumption peaks. But while waiting for solutions (battery, hydrogen, hydraulics, etc.) to be commissioned, the miners are there to buy up the lost electricity. It is a subsidy for energy companies whose operating costs are exacerbated by spikes in demand.

Developing sustainable energy through bitcoin mining

As we mentioned, the growing share of wind and solar will lead to more energy wastage due to the unpredictable nature of renewable energy generation. Hence Arcane’s relentless analysis:

“The location agnosticism and interruptibility of bitcoin mining makes it the perfect purchaser of renewable energy. Bitcoin miners can settle in areas of excess wind/solar power and set up a fleet of machinery perfectly suited to the excesses. Having bitcoin miners next to wind/solar power plants avoids wasting energy and acts as a renewable energy subsidy. »

Bitcoin mining should be an integral part of the energy transition. The development of renewable energy can only accelerate if the surplus energy is purchased.

Reducing Methane Flaring From Bitcoin Mining

There is a relatively unknown characteristic of the oil industry: flaring (which consists of burning gas as soon as it comes out of the ground).

This apparent aberration stems from the fact that natural gas is a by-product of oil extraction and that it is sometimes not economically viable to bring it to civilization.

Unfortunately, flaring releases large amounts of methane (a greenhouse gas 80 times more potent than CO2). The reason for this is that the combustion of methane (CH4) to CO2 is not complete if the wind blows too much on the flares.

One solution to prevent these methane leaks into the atmosphere would be to burn it in an electrical generator where the combustion reaction is complete:

“Bitcoin mining has emerged as the best technology to reduce natural gas flaring. The geographic agnosticism, modularity and portability of mining machines allow them to be installed directly on oil wells to consume this natural gas and neutralize methane leaks. »

Arcane notes a huge growth in the number of BTC miners installed on oil fields in both the United States and Canada. Projects are also underway in other regions, such as Russia and the Middle East.

Here’s an end to the shocking figure of this 60-page report that we invite you to tweet to the deputy @AuroreLaluq…

“Bitcoin is by far the most cost-effective way to reduce greenhouse gas emissions. For a $1,000 investment [sur une torchère], bitcoin mining reduces emissions by 6.32 tons of CO2 equivalent per year, compared to 1.3 tons for wind energy and 0.98 tons for solar energy. »

It is time for some to put water in their wine and admit that bitcoin is part of the solution to tackle global warming.

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Nicolas Teterel Avatar
Nicolas Teterel

Journalist covering the Bitcoin revolution. My papers deal with bitcoin through geopolitical, economic and libertarian prisms.

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