Bitcoin Mining Has Huge Role In Energy Production Expansion

The explosive growth of artificial intelligence, cloud computing, and digital finance has transformed electric industry operations.  Forward-thinking miners and utilities can leverage these technological shifts to build generation capacity and create more resilient electrical grids.

DATA CENTER LANDSCAPE

Data centers locate where speed of energization, connectivity, and operational costs align favorably, but speed of energization remains a significant challenge.  North American data center leasing vacancy rates are below 2% in 2024, down from over 10% in 2018. End-users now pre-lease capacity years in advance as new generation is slow to energize.

Unlike traditional load growth that materializes gradually over years, data centers demand immediate energy solutions.  This creates a difficult position for some electric utilities with typical new generation planning—build when demand is reliably certain to arrive.

New electricity generation projects can require 2-7 years development time, while major data center deployment has compressed requirements of 18-24 months.  Some utilities fund new generation ahead of need, but that typically leads to subsidizing projects until new load arrives, increasing costs for existing customers.

UNTAPPED OPPORTUNITIES

Many are already aware of bitcoin mining’s value proposition of demand management, excess energy conversion (flared gas, etc.) and remote energy resource access.

Demand Management: Mining operations can be curtailed during peak demand periods more easily than traditional loads, serving as valuable demand response resources necessary for grid balancing, particularly useful when variable generation resources are connected to the grid.

Wasted Energy Conversion:  Companies take energy that would have otherwise been wasted—such as flared gas at oil production facilities—and convert it to electricity for bitcoin mining operations.

Stranded Asset Utilization: Similar to wasted energy conversion, mining operations can monetize remote generation resources that would otherwise be underutilized due to transmission constraints, internet connectivity, or economic conditions.

What I am writing about is an overlooked opportunity:  Bitcoin mining’s unique load profile provides value through the ability to build new resources ahead of need, avoiding subsidization by existing customers, and allowing distributed transmission construction compatible with data center growth.

BUILD-AHEAD TO OVERCOME TIMING MISMATCHES

Strategic deployment of bitcoin mining as partners in new generation construction transforms build-ahead economics—mining operations create load from facility energization.  When public utilities build new generation and partner with mining operations, they can create new revenue upon energization.  This has multiple benefits:

• Project load certainty for funding
• Increased energy availability for new load
• Subsidization avoidance
• Reduced grid congestion

Utilities that plan for new generation today can factor in partnerships with bitcoin mining companies, even if other loads are not on the horizon, and can scale mining operations to fit new generation size.  Miners take bitcoin price and mining difficulty risk in exchange for long-term beneficial electricity rates.  This provides the utility with sufficient load certainty to fund construction projects that would have otherwise not been available, and gives miners access to long-term funding for business expansion.  

More new generation when energy production growth is a national competitive interest benefits everyone.

Additionally, by building generation for just-in-time miner loads, subsidization of new generation by existing utility customers becomes a thing of the past.  As power purchase agreements end and new load arrives to the region, energy transitions to other long-term off-takers.

Additionally, as new load arrives, transmission infrastructure is built to suit, again, not requiring subsidization of arriving loads by existing ratepayers.  Infrastructure can be built as needed, where needed, resulting in more geographically dispersed load points and reducing grid congestion.

THE PARTNERSHIP ADVANTAGE

A partnership between electric utilities and bitcoin mining companies opens value within utility service territories with abundant small to medium untapped generation resources by energizing resources now, at a time when tapping new resources is dearly needed.

New generation projects that partner with mining companies provide revenue at energization, tapping unused resources, leading to lower system-wide rates and ensuring local ratepayers benefit directly from local resources, creating jobs and new business opportunities.

Electricity’s value far exceeds its cost per kilowatt-hour, and partnerships forged between bitcoin mining companies and electric utilities provide an amazing chance to build power plant capacity that will fuel local business, strengthen communities and power entire nations.

This is a guest post by David Plotz. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.