Author | Bitcoin Clean Energy Initiative Memorandum
Introduction: Although Musk criticized Bitcoin’s use of fossil energy, especially coal, on the 13th, and suspended Tesla from accepting Bitcoin payments, causing the price of the currency to plummet, his support for Bitcoin is consistent with his support for clean energy, and is not a sudden change.
The paper, which received a nod from Musk on April 22, argues that due to the volatility of clean energy, bitcoin mining serves as a flexible load option that can harness excess clean energy and help the grid deploy more renewable energy. Bitcoin mining can help renewables have better resilience.
In fact China’s use of abandoned water and electricity in the southwest proves this point. The development of renewable energy will inevitably result in the emergence of abandoned wind, water and light. The use of abandoned electricity by bitcoin mining is unmatched by any industry.
But there is no denying that thermal power is still a relatively high percentage of bitcoin mining. With Musk single-handedly bringing the cryptocurrency world into the next phase of the bull market, and now standing firmly in criticism of Bitcoin’s waste of energy, more discussions and variables are bound to emerge in the future around this topic throughout the industry.
Title: A Future Full of Clean Energy, Bitcoin is the Key
In this paper, we aim to explain how the Bitcoin network can act as a unique energy purchaser, thus enabling society to take full advantage of more solar and wind power capacity. This deployment, along with energy storage, is intended to facilitate the transition to a cleaner, more resilient grid. We believe that today’s energy asset owners can become tomorrow’s essential bitcoin miners.
The focus of this paper
Bitcoin mining offers the opportunity to accelerate the global energy transition to renewables as a complementary technology for clean energy production and storage.
Solar and wind are now the world’s cheapest sources of energy, but they are suffering from deployment bottlenecks due to their intermittent power consumption.
Bitcoin miners, as a flexible load option, can potentially help solve many of these intermittency and congestion problems, thereby enabling the grid to deploy more renewable energy.
By deploying more solar and wind, these generation technologies could fall further back on their respective cost curves, bringing their marginal costs closer to zero.
About this article
The Bitcoin Clean Energy Initiative has written this short research paper as a starting point to share our perspective on how Bitcoin mining (combined with renewable energy and storage) is appropriate for accelerating the energy transition. To complement this work, ARK Invest provides an open source model that demonstrates how bitcoin mining can increase the capacity of these renewable + storage systems to provide a greater percentage of the grid’s base load energy demand for comparable or lower cost per unit of economy. This work is just the beginning of what we hope will be a fruitful exploration of solutions to help usher in an abundant, clean energy future.
A Unique Energy Buyer
Bitcoin miners are unique energy purchasers because they offer highly flexible and easily disruptive loads, provide payments in globally flowing cryptocurrencies, and are completely location-independent, requiring only an Internet connection. These combined qualities constitute an extraordinary asset that energy purchasers can turn on or off from anywhere in the world at any time.
Renewable energy is now the cheapest source of energy
Over the past decade, the average cost of energy (LCOE) for solar and wind has fallen by 90% and 71%, respectively . The unsubsidized costs of solar and wind are now 3-4 cents/kWh and 2-5 cents/kWh, respectively. some individual projects are even less expensive. For context, the average cost of energy (LCOE) for fossil fuels (e.g., coal or natural gas) is 5-7 cents/kWh. This means that solar and wind energy are already less expensive than coal and natural gas. Solar and wind energy are also just about equal to geothermal and hydroelectric power  at about 3-5 cents/kWh, which is cheap but geographically limited.
There will always be inexpensive individual sites that offer different power sources, such as hydro or geothermal, but in general, solar and wind are now the lowest cost and most scalable sites. What’s more, we believe they will only continue to get cheaper as time goes by. In particular, we believe that for solar, a semiconductor technology, prices will continue to fall by 20-40% for every doubling of cumulative capacity .
Timing supply-demand mismatch and grid congestion
However, compared to more expensive base load power like natural gas or nuclear, both solar and wind have one major drawback: intermittency. In the energy industry, this leads to the so-called “duck curve” .
By its very nature, sunlight glows during the day, not at night. Wind is more unpredictable, but it tends to be windier at night. As a result, energy supplies are either abundant or absent. However, demand peaks when people return to their homes and turn on their appliances in the afternoon or evening, when neither solar nor wind energy is available. The end result is significantly more electricity than society typically needs for a few hours a day, and nowhere near enough when demand peaks. The same challenges occur with the seasons, as there is more sunlight in the summer and more wind in the winter. These deficiencies are further exacerbated by grid congestion , which is similar to highway traffic and often occurs because solar and wind projects are often built in rural areas with lots of sun and wind but little nearby load (i.e., end users) and transmission capacity. As a result of these challenges, there are currently over 200 GW6 of  delayed solar and wind generation in just three U.S. grid interconnection queues. These are solar and wind projects with developers and access to financing that the grid cannot practically accommodate.
Increases in transmission capacity and energy storage are critical to solving these problems, especially as the cost curve for lithium-ion batteries continues to fall. But current general-purpose scale batteries are still too expensive to deploy universally. After their cost has fallen another 80 percent, they still face physical limitations on their lifespan and how long they can store energy without loss. So this will become the most critical technology for storing cheap noon solar energy to meet peak demand.
Bitcoin mining is the ideal complement to generation + storage
On the other hand, Bitcoin mining is the ideal complementary technology to renewable energy and storage. Combining generation with storage and miners offers a higher overall value than building generation and storage separately. As mentioned above, there are always physical limits to how much energy can be effectively stored without dissipation. However, only a few hours of storage capacity is needed to almost completely solve the daily intermittency problem.
By combining a miner with a renewable energy + storage project, we believe it can.
- improve returns for project investors and developers, shifting more solar and wind projects to profitable areas.
- allow solar and wind projects to be built before lengthy grid interconnection studies are completed (since bitcoin miners can consume energy until it can be sold to the grid)
- Provide the grid with readily available “excess” energy for increasingly common black swan events, such as overheating or overcooling during peak demand (e.g., a power outage in Texas in early 2021).
This “excess” energy will also be very useful as society’s demand for electricity increases with the spread of electric vehicles and the electrification of all devices. In a sense, the miners’ appetite is unlimited, allowing them to eat whatever is left of the “duck belly”. Given these benefits, we think it is logical for utility-scale storage developers to use bitcoin miners to scale their current battery offerings.
As society begins to deploy solar and wind more, we believe it will allow LCOE to lower its cost curve even further, making the next batch of solar and wind more affordable. If LCOE declines, it may open up profitable new uses for electricity, such as desalinating seawater, removing CO2 from the atmosphere or producing green hydrogen. Some experts in the field expect the marginal cost of producing new electricity to be practically close to zero .
A second potential major impact could be the massive transformation and greening of the Bitcoin mining industry. It is estimated that there is only 10-20 GW2 of mining capacity worldwide today . Of the 2 GW of solar and wind projects deferred on the US grid alone, even deploying miners at 20% of capacity could result in 40 GW of new mining capacity, effectively dwarfing the entire existing global market. Note that while many of these projects will likely be built “behind the meter” to take advantage of as little solar and wind energy as possible, they may still be mined using grid power during other profitable periods, and therefore will not be completely green from day one. However, if solar and wind become cheaper and constitute an increasing amount of base load power, then eventually the trend will continue to move toward total renewable-based arithmetic. We believe that deploying such a large amount of new and geographically diverse total computing power will also enhance the security of the Bitcoin network, potentially further cementing Bitcoin’s position as a reliable currency.
Using real data, we (ARK Invest) demonstrate that bitcoin mining can encourage investment in solar systems (solar grid + batteries), allowing renewable energy to generate a higher percentage of grid power with potentially no change in the cost of electricity.
Without bitcoin mining, solar (an intermittent energy source) would only provide 40% of grid power, and utilities would then face the need to fund large investments with higher electricity prices. However, by integrating bitcoin mining into solar systems, energy providers (whether utilities or independent entities) would have the ability to arbitrage between the price of electricity and the price of bitcoin, and could potentially sell “excess” solar energy and provide almost all of the grid’s electricity needs without reducing profitability.
The graph above shows the impact that bitcoin mining could have on the adoption of solar systems. Assuming a constant cost of electricity, it tracks the percentage of solar energy available to the grid. y-axis is the amount of power generated by solar energy, and x-axis is the battery capacity. The size of each circle is proportional to the size of the bitcoin mining operation. At each point in time, the solar system meets a different percentage of the grid’s demand. As bitcoin mining scales up, the solar system continues to grow in size and meet a higher percentage of the grid demand. The increased bitcoin mining capacity allows energy providers to generate “excess” solar power without wasting energy. At the bottom left of the chart, without bitcoin mining, renewable energy would only meet 40% of the grid’s demand. In the upper right corner of the chart, including solar, batteries, and bitcoin mining, 99% of the grid’s demand can be met.
Our model shows that integrated bitcoin mining can transform intermittent power resources into power stations with base load. It suggests that adding bitcoin mining to the toolbox of power developers should increase the overall potential market for renewable and intermittent energy sources. All other things being equal for bitcoin mining, renewables can more economically provide a significant portion of the electricity anywhere. The cost reductions associated with the scaling of renewables in the aftereffects are likely to accelerate, making them more economically competitive in equilibrium.
We provide an open-source version and describe the model and its assumptions in detail here .
There are still some important questions about how the above vision will work. We see at least three meaningful business opportunities.
- Energy management software and services
Energy management companies specializing in storage and mining can build software for determining in real time the best use of newly created electrons: use, storage or mining. They can also provide critical asset management tools and analytics to monitor project performance.
- Energy/mineral markets
Hosted marketplaces may emerge to connect project developers, miners and financiers. One of the key challenges will be to address the current creditworthiness threshold requirements for existing miners.
- ASIC manufacturing
New chip foundries could be built to meet the expected surge in demand. Samsung and TSMC (TSMC) are leading the way with the recently announced new North American fabs. We also expect to see continued improvements in hardware and firmware to improve the durability of mining equipment optimized for interrupted power use.
A Call to Action
Bitcoin and energy markets are converging, and we believe that today’s energy asset owners will likely become tomorrow’s miners. Utility executives, sustainable infrastructure funds, and grid-scale storage developers are all well-positioned to accelerate future growth by aligning their strategic roadmaps and deploying large-scale investments into the emerging synergies between bitcoin mining and clean energy production.
We plan to follow up with additional research explorations and focus more resources on the intersection of bitcoin and clean energy.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/musk-criticizes-coal-mining-what-his-pro-bitcoin-is-the-key-to-clean-energy-paper-says/
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