Monday, January 08, 2018

Bitcoin and Solar Energy: When Does It Make Sense?

(One of the fascinating stories in recent months has been the Bitcoin craze: Is this cryptocurrency a sign of the future -- or simply a modern version of Tulipmania?  And now people are starting to understand it can take a lot of energy to run those whiring computers.  Could solar energy play a big role here? Pat Dowling of PowerScout takes a look.)

2017 was a big year for Bitcoin. The digital currency’s growth surged from about $1,000 at the beginning of the year all the way up to to a staggering $19,000 at one point in December. Even through its peaks and valleys, Bitcoin fully got the attention of pretty much everyone in and outside of the financial world.

One of the major problems with Bitcoin is the massive amount of electricity it takes to mine the coins. Specialized mining computers require a lot of power as they search for the correct hash keys to actually make Bitcoin.

Plus, the algorithm behind the digital currency means that mining is just going to get harder and more intensive as time goes on. There’s actually been a 95% correlation between the price of Bitcoin and the mining difficulty over the past couple years. As the price moves up, it gets harder to mine, and fewer Bitcoins are produced.

Because of this, one researcher said in 2016 that Bitcoin mining could one day “lead to a continuous electricity consumption that lies between the output of a small power plant and the total consumption of a small country like Denmark by 2020.” This number will only grow exponentially larger in the future because it will take about 132 years to actually mine all 21 million Bitcoins out there. And people are going to still want to mine since the well-known cryptocurrency is worth so much right now.

As a result, a lot of prospective miners are looking towards renewable energy resources like solar power to fuel their operations. Bitcoin and solar power have actually had a long relationship that dates to some of the virtual currency’s first days. One 2012 fourm conversation on detailed the setup of a solar power mining operation in Australia back when Bitcoin’s price was just a fraction of where it is now.

One cryptocurrency enthusiast published a guide in 2013 about how to build a solar-powered mining plant. A Bitcoin lover took to YouTube in 2015 to show off his Bitcoin solar-powered mining farm. The YouTube miner said using free solar electricity off-set the massive power consumption of his S3 Antminer.

One user on the popular discussion website Reddit posted in mid last year about their solar mining operation in the Southwest desert. They said at the time that one Antminer S9 ASICS mining system cost about $1225 alone, and the total cost of each mining operation was $8,000 with the addition of 6kw of solar panels, deep cycle lead-acid batteries, and a power control system. They wrote they were making about .007 Bitcoin off of each miner each day at the time.

Even though mining in the desert has its perils because the high heat can destroy a mining rig, the Reddit user said they were hoping to expand their operations because the whole process was working so well.  

Since Bitcoin mining operations are pretty much driven (or hindered) by electricity prices, some believe solar power could actually make mining somewhat viable despite the limitations of the cryptocurrency’s algorithms. A Bitcoin club called Nastymining teamed up with the solar energy company Sunpower in early 2017 to fuel some mining equipment inside their facility. The operator of the company said their total green energy system eclipsed 10kw with the addition of a wind turbine that was bought through sponsorship.

Tam Hunt of Greentechmedia calculated back in September that a 1-megawatt Bitcoin mining project could have a “net present value” of at least $9.3 million dollars, and a 20-year net revenue of about $19 million, all assuming a Bitcoin price of $2500 (which seems like an eternity ago). Hunt also said his model, which can be seen here, does not rely on negatively priced power.  

Even though mining is tougher today due to a much higher Bitcoin price, these numbers are still looking pretty good when compared to the average 1-megawatt solar project that usually has a value of $200,000 to $400,000.

Some have also written about the potential for solar Bitcoin miners to save money on taxes by taking advantage of renewable energy tax incentives in the United States, even if they were to sell the Bitcoin they mined. Plus, the use of solar panels could give miners more flexibility in their operations since they could be placed off of a grid. Miners then could have their rigs in rural areas, which would help save a lot of money on land costs. Mining operations could then be extended all throughout the night as well if onsite storage was added. 

States like Texas don’t currently have permit requirements for mining, so a setup could be built and running very quickly after acquiring land and building the actual solar and mining rigs.

However, miners who connect to their panels to the grid could then potentially sell excess power to the local utility if they lose interest in the project, (or if the price of Bitcoin falls or even collapses.) This would provide an extra insurance policy to those who might still be skeptical of Bitcoin’s price point.

Solar power is just one of the renewable resources Bitcoin miners are turning to in order to power their operations. Solar has the distinct advantage of being relatively accessible to the average consumer as compared to resources like hydroelectric or geothermal power.

As a result, solar panels give individual miners and smaller organizations an incentive to get back into mining, which takes (some) of the power away from large-scale operations and corporations that use massive rigs to mine Bitcoin. 

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