Most of the conversations about Bitcoin infrastructure over the past two years have focused on the growing convergence of the mining sector with traditional power generators and power companies. At the Bitcoin 2022 conference, a panel hosted by this author discussed this trend and what the continued growth of mining means for the electric grid and energy markets. Besides discussing how the grid works and demystifying some basic information about the energy infrastructure, panelists shared their views on current trends, expected benefits and even some risks from the fast-growing mining sector that has forged long-term and wide-ranging partnerships with energy companies.
Mining growth has the potential to impact every market that uses energy, meaning: everything. This article summarizes some of the key ideas that committee members shared about what the future might look like. All quotes and comments referenced in this article from the Bitcoin 2022 dashboard are hyperlinked to timestamps during the discussion of the dashboard.
Improved energy pricing mechanisms
Bitcoin mining is radically changing some fundamental aspects of the energy industry, and with these changes come new hurdles to overcome. “[Mining] Harry Suddock, Vice President of Strategy at GRIID told the audience.
In 2019, energy companies were very skeptical and disbeliever about signing PPAs with miners like Sudock’s GRIID usually because of the huge amount of energy miners wanting to buy them. Sudock explained that his team will hear responses from energy companies about the impact: “What? We’ve only signed a deal of this size once in the past 30 years.”
Today, these phone calls with other power providers are made easier. But discussions between miners and energy providers can still improve in one key area: price structures.
“I think the language between the energy company and the bitcoin miner is adapting to become somewhat similar,” Sudock said. “I think the overall price structure system and how energy is priced and sold — that’s where the next level of translation and education is happening now.”
In short, everyone – that is, energy companies – “gets” what the miners are trying to do, but the mechanisms for achieving bitcoin mining goals are still developing. “There is still a lot of energy to be purchased by miners today that has not yet been for mechanical and structural reasons. But these barriers will be broken over time,” Sudock said.
Zach Bradford, CEO of CleanSpark, agreed with Sudock. “Nobody knows how to price that much power for this consistent load,” he said, noting the hurdles miners face when structuring deals with energy companies.
So how can energy companies and bitcoin miners remove these information and pricing difficulties? The answer is simple: prioritize the price structure of mining to make it easier for miners to purchase power based on their unique load requirements.
“If I were the CEO of an energy company, I would be promoting to the board of directors putting in place a bitcoin mining rate structure to attract [miners] for your area, and we’ll be able to innovate in this process together and get there. “
Building Bitcoin Mining Communities
As conversations between miners and energy providers became easier and more straightforward, all panelists agreed that the relationships between these two sides of the market would become bigger and stronger than ever. As a result, cities and towns that rely on facilities provided by companies working with miners will be safer, more reliable, and more advanced than the same infrastructure in other geographies.
“I think we will wake up in 10 years, and the towns, counties, cities and communities that have bitcoin miners will be thought of in this incredibly positive and optimistic way. And the cities that don’t have them yet, are going to recruit bitcoin miners to be there,” Sudock said.
For Sudock, one of the driving factors for this improvement is the revenue being brought into these cities not just from building and maintaining a mining facility, but from injecting new revenue into the local economy for power generation that no one else previously provided.
Bradford agreed, adding that he expects to see larger community partnerships involving bitcoin miners. In some of the cities where CleanSpark operates mining farms, for example, Bradford explained how they have invested directly in upgrading the electricity infrastructure in those areas, which benefits not only their business but every business and resident connected to that grid.
“I think you will see a boom in communities that embrace bitcoin mining,” Bradford said.
Create a better electrical network
Since bitcoin miners want to buy a lot of energy all the time, the existing electrical grid infrastructure needs to be modernized and expanded at the same pace that miners are doing and the fragmentation of the bitcoin network is increasing. For committee members, this will be – building a better grid – one of the biggest hallmarks of the positive impacts mining has on the energy and grid markets.
“What a lot of people don’t realize is how fragile our network is,” Bradford told the audience. One of the main reasons for this is simply the age of the existing network infrastructure. He explained that miners “can interact in a way that can improve the health of the network.” Because miners are a unique type of energy customer, the requirements for their loads create opportunities for mining companies to finance and build new electrical infrastructure.
“The age of our network is an issue, and someone has to pay for it. I think the bitcoin miners are in a very good position because of the profits we’re making and the incentives we have.” […] “In fact improving the network across this entire nation,” Bradford said.
Mining should not be considered as an external force affecting change in the energy infrastructure. It is the network. “Bitcoin mining is an energy infrastructure. It is what it is,” Paul Prager, CEO of TeraWulf, told the audience. As energy consumers (miners) and energy producers (generators) become more vertically integrated over the coming years, “you will see massive improvements in the grid,” Prager said.
why? Because energy transmission is regulated, incentives are very low for outside investment in transportation improvements. “The miners are going to invest in it because they want high-quality electricity so they can mine all the time,” Prager explained. This improved infrastructure will not only serve miners. He will serve all who use force.
Sudock said miners are highly motivated to provide good energy market behavior and mining power consumption profile, more than any other large-scale energy consumer.
In short, because they want to consume as much energy as possible, miners are willing to invest in new infrastructure and demonstrate good consumer behavior to get the power they want, thus representing a positive new type of user in the energy market. Sudock said energy companies at the forefront of their industry “are being proactive about building relationships with miners”.
Bitcoin mining offers a revolutionary method for pricing, consuming and building electricity infrastructure. With aging grids and exponentially increasing demand for electricity, all panelists agreed that the services and investments that miners could provide to power grids around the world would do nothing less than a historic rebuilding of electricity infrastructure and the improvement of electricity generation and transmission for all types of energy consumers. . In short, mining revolutionizes the energy market as much as it disrupts the currency markets.
This is a guest post by Zack Voell. The opinions expressed are their own and do not necessarily reflect the opinions of BTC Inc or Bitcoin Magazine.