The North American power grid, a vast and intricate tapestry of interconnected energy systems, faces challenges of ageing infrastructure, extreme weather and how to bring more intermittent wind and solar farms online. Cryptocurrency mining could be the answer.
Cryptocurrency is a controversial potential solution. Proponents argue that blockchain technology, the underlying architecture of cryptocurrencies like Bitcoin, can revolutionise the grid by enhancing decentralisation, transparency and efficiency.
However, critics raise concerns about its energy consumption, security vulnerabilities and potential for market manipulation.
A cryptocurrency mining farm typically consists of one or more data centres with thousands of specialised computers. Miners earn tokens or coins by using computers to solve complex mathematical puzzles in the decentralised database that underpins it, the blockchain.
In recent years there has been an emerging trend for miners to operate in areas where there is an overproduction of green energy and therefore lower electricity prices – a recent University of Cambridge study showed that 76% of cryptocurrency miners use electricity from renewable energy sources as part of their energy mix.
Like any evolving industry, cryptocurrency mining companies have sought to streamline their operations and maximise profits. Finding cheap, plentiful energy is a key part of this strategy, and a deciding factor in where mining operations choose to locate.
Crypto mining is very sensitive to power prices, to participate in demand response crypto miners will lose value from going offline, but in some instances, the price/kWh paid can be above the value for currency/kWh mined.
On the surface, adding the demands of crypto mining to the power grid seems counterintuitive, but it rests on an established concept: demand response. The convergence between crypto mining and the power sector is far more complex than the impacts on energy consumption. It is also a matter of potential.
One of the key aspects of the power grid is that it must supply exactly the amount of power demanded at any given time. When power grids were first established, they were designed with coal and big spinning turbines in mind. As a result, the mechanisms keeping the entire system stable relied on the same technology.
But increasing integration of increasing levels of volatile renewables is impacting both the stability of the grid and how balancing services are provided. Today, there are three main solutions: peaker plants; demand response; and energy storage.
The advantages of crypto mines in demand response revolves around their high degree of flexibility. Industrial plants can also reduce their power consumption, but not as easily because of the disruption to physical processes.
In theory, a crypto miner could run full tilt when power is plentiful and cheap – a sunny morning or a windy afternoon, say – and ease off when the market is tighter, and prices are higher.
This would act like the inverse of a power plant, drawing spare power at times of excess and reducing activity at times of scarcity.
Doing so would help level out the extremes at either end of the market, reducing the number of hours when prices are zero or negative and also the number of hours when prices spike due to tight conditions.
As a source of extra demand, mining could also encourage developers to build more renewables generation by enabling developers to potentially sell surplus solar and wind generation through a Power Purchase Agreement, providing a guaranteed return on investment for the development of further low-carbon assets.
- Joe Hayden is VP of revenue at GridBeyond
