By Andrey Kim, CEO and Co-Founder at GDA
Over time, the relationship between Bitcoin mining and the energy sector has deepened. While Bitcoin mining was once only a negligible fraction of global energy, it’s now one of the world’s largest energy consumers. But something far more profound is happening than this simple growth in demand. Bitcoin is becoming a net positive for electric grids around the world, a potential catalyst for the global energy transition, and a solution to pressing energy challenges.
As economies across the globe increasingly look for new sources of energy, Bitcoin mining is poised to play a critical role in integrating a diverse range of energy solutions. The interdependence between Bitcoin miners and regional power grids is now becoming undeniable in certain regions of the world. An interdependence where each one’s success enhances the other. The more Bitcoin miners invest in specific regions and collaborate with local stakeholders, the more those regions that embrace Bitcoin mining will reap the benefits of such symbiosis.
Before getting into why Bitcoin miners are playing such an important role in the energy infrastructure, it’s worth understanding some of the problems that affect the energy industry.
Regional power grids are constantly facing challenges, including disruption of the power supply, higher costs for consumers, and deterioration of the infrastructure. Two significant factors that contribute to such challenges are energy intermittency and energy waste.
- Energy intermittency occurs when there is a mismatch between the electricity produced and real-time demand. When this mismatch occurs, the electricity is either too much or not enough for consumers.
- Energy waste, on the other hand, refers to inefficiencies in energy production or consumption, which is often made worse by limited storage capabilities and leads to the loss of usable energy.
While the problems of energy intermittency and energy waste have always existed, the recent transition towards cleaner energy sources has further exacerbated the challenge, resulting in reduced energy security and increased amounts of market inefficiencies.
Enter Bitcoin miners. A unique market player that enjoys a great degree of flexibility and is able to absorb large amounts of energy. Grid stabilization is a prime example of how miners can help mitigate energy intermittency and reduce waste through their operations. Through a process known as energy curtailment, miners can interrupt their consumption of electricity during periods of high demand, which ultimately benefits consumers and stakeholders.
Bitcoin mining equipment, photo by GDA
By absorbing the excess electricity during moments of low demand, Bitcoin miners are able to enhance the profitability of power plants and attract even more producers. Ultimately, this results in lower electricity prices and greater energy security for consumers.
As mentioned above, renewable energy sources have struggled to be efficiently integrated into electric grids around the world. This is mainly because of the problem of intermittency. Bitcoin miners can further facilitate the transition to renewable energy and tackle issues of intermittency and waste thanks to its ability to function as a buyer of last resort.
The unique relationship between Bitcoin miners and energy producers is particularly interesting in locations where grid connections and infrastructure are still in development. In fact, by creating significant electricity demand, miners can expedite investments, asset monetization, and grid balancing.
Bitcoin mining supports solar and wind energy producers by acting as a predictable buyer that absorbs excess power during low demand. This offers renewable energy projects better financial stability, encouraging further investment in their infrastructure. Strategically placed mining facilities can hedge renewable investments, promoting development. As mentioned on the National Hydropower Association’s website, Bitcoin miners can “act as another revenue stream for hydropower owners, provide a stable revenue source, assist with energy demand management, price arbitrage, and diversify revenue sources.”
Wind energy supply curve: Without Bitcoin mining, production may halt during low demand. With mining, the farm sells q(Bitcoin mining) electricity, earning revenue (red hatched area) and surplus above the supply curve. Source
These strategies can have ripple effects that go beyond the simple strengthening of the electric grid. By investing in local communities and partnering with stakeholders, the Bitcoin mining industry creates jobs, revitalizes infrastructure, and strengthens local economies. This is particularly evident in rural areas, where Bitcoin mining is helping to offset the impacts of offshoring and declining industries. Many rural communities across the U.S. States such as Texas and Georgia have benefited from Bitcoin mining operations, including capital investment, infrastructure development and job creation.
From a political standpoint, the recognition and support of Bitcoin mining by elected representatives has been growing even because of the way it benefits local communities. This has paved the way for a more informed and constructive dialogue about the industry as a whole. The recent U.S. elections and ongoing discussions between Bitcoin miners and the current administration demonstrate Bitcoin mining’s continued emergence as a leader in energy innovation, grid stabilization, and sustainability.
Bitcoin miners are addressing some of the most pressing challenges of our times—solving critical energy security challenges without disrupting the ongoing energy transition towards cleaner solutions.
From hospitals to factories, all the way to residential buildings and telecommunications infrastructure, a reliable electric grid is essential for modern economies that prioritize competitiveness, economic growth, and also national security. Miners are playing an increasingly important role in stabilizing grids, and are expected to continue during a period of hypergrowth and rising profitability such as the one we are going through.
But it’s a two-way street. Communities and lawmakers worldwide should learn more about the industry and understand the incentives at play. Miners and regional stakeholders working toward a beneficial balance between mining and power grids could unlock a new era of prosperity for the world. At this point, we have a large enough sample size to know that it works.
* The first photo is by American Public Power Association on Unsplash
