Artificial intelligence, cloud computing and digital financial technology have transformed the electric industry. Miners and utilities who are forward-thinking can use these technological changes to increase generation capacity and build more resilient grids.
DATA CENTER LANDSCAPE
The location of data centers is based on the alignment of speed, connectivity and operating costs. However, speed remains an important challenge. North American leasing vacancy rates for data centers are expected to be below 2% in 2020, compared with over 10% last year. The end users pre-lease their capacity in the years before they need it, as new generations are slow to be powered up.
Data centers require immediate solutions to energy problems, unlike traditional loads that grow slowly over many years. This creates a difficult position for some electric utilities with typical new generation planning—build when demand is reliably certain to arrive.
The development of new electricity generation projects may take 2-7 years, but the deployment of major data centers can be completed in 18-24 months. Some utilities finance new generation before the need. However, this leads to subsidies for projects that are not completed until there is a new demand.
Untapped Opportunities
The value of Bitcoin mining is well known. Its benefits include demand management, energy efficiency, and the conversion of excess energy (flamed gas etc.). Remote energy resources access.
Demand ManagementDuring peak periods, mining operations can easily be cut back, and they serve as valuable resources to balance the grid. This is particularly true when you have variable generation connected.
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 UtilisationMining operations, similar to the conversion of wasted energy, can monetise resources for remote generation that are otherwise underutilized because of transmission limitations, 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. Public utilities can generate new revenue when they partner with mining companies to build new power plants. It has many benefits.
- Certainty of project load for funding
- Energy availability increased for new loads
- Subsidization avoidance
- Grid congestion reduced
Even if no other load is on the horizon for utilities planning new generation, they can still factor in bitcoin mining partnerships and scale operations to match new generation. In exchange for favorable electricity rates over the long term, miners will take on bitcoin mining risk and price. The utility can use the load-stability to finance construction projects, while miners have access to funding to expand their business.
When energy production increases, everyone benefits.
Subsidizing new generation is also a thing from the past, as existing customers no longer have to subsidise it. Energy is transferred to long-term consumers as power purchase agreements expire and new loads arrive in the area.
As new loads arrive, the transmission infrastructure can be built accordingly, thereby avoiding any subsidy from existing ratepayers. Infrastructure can then be built where and when needed. Grid congestion is reduced, as more geographically diverse load points are created.
The Partnership Advantage
Electric utilities can benefit from a partnership with Bitcoin mining companies by using their resources to energize them at the right time, when they are desperately needed.
The new generation project that partners with mining companies provides revenue upon energization by tapping into unused resources. This leads to lower rates system wide and ensures local ratepayers directly benefit from the local resources.
Electricity is worth more than the cost of a kilowatt. This partnership between mining companies for bitcoin and utilities can help build power plants to power local businesses and communities.
David Plotz is the author of this guest post. Opinions are solely their own, and may not reflect the views of BTC Inc.
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Source: bitcoinmagazine.com
