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How Bitcoin can Decarbonize the Grid
Digital Nova Scotia Presentation
I regularly give presentations to Digital Nova Scotia around Bitcoin and cryptocurrency. On April 11th, I’ll be giving a presentation on Bitcoin Mining and how it helps decarbonize and strengthen the energy grid. I’d like to generate a lot of support and attendance for this event. So this is why I am sharing the invitation to the presentation here in my newsletter. It would be great for some of you to attend the presentation and ask some good questions. Don’t be afraid to challenge me!
As a bit of a teaser, I am going to go into some of the points I will be making in the presentation. Comments are welcome in this post so that I can strengthen the argument!
Decarbonization the Grid
How exactly does a network of computers that uses tons of energy help decarbonize the grid? We first need to cover the basics of Bitcoin Mining.
Here are some of my older letters I’ve written on the topic
Decarbonizing means getting away from using dirties sources of energy product such as coal. The world is still heavily reliant on coal, gas, and oil.
But with that transition away from coal power plants means taking on grid instability. You see, as dirty as coal is, it is reliable, unlike the wind or the sun which doesn’t always blow or shine. So how then do we get away from coal?
How does “The Grid” Work?
For an in depth explanation, I recommend the book “The Grid”
In order to grok how Bitcoin strengthens and decarbonizes the grid, we need to have an ample understanding of how the grid works.
Energy producers must always overproduce for the grid, otherwise consumers face blackouts/brownouts
Energy must be transported to the destination through transmission lines
(ex. power plant to city)
Consumers pay the highest rates for energy
In order to decarbonize the grid, we need to invest heavily in solar, wind, hydro, and nuclear. Not only that, we need to add transmission lines to bring that newly generated electricity to consumers. In essence, it is not enough to build those new power plants, we also need to integrate them into the existing grid. Despite significant investment from power producers and governments, we still need to accelerate the rate at which we green the grid. How do we do that?
Bitcoin Subsidizes Infrastructure
The Bitcoin network will buy energy immediately directly from the power producer. So imagine that a power producer just built a wind or solar farm, or a hydro electric dam 100 kilometers from the nearest grid substation. The farm is ready to produce energy, but cannot because it is not integrated into the grid. The cost of building such a transmission line varies by area, but it is on the order of hundreds of thousands of dollars. For as long as it takes to build the transmission the lines, the wind/solar/hydro is idle. This leaves energy and thus money on the table.
A bitcoin mining operation can be placed directly at the energy farm IMMEDIATELY after being built.
A modest bitcoin mine can be set up next to a farm and start monetizing the energy immediately. This money can then be used to subsidize the cost of the transmission lines. Or, ones those transmission lines are built, the energy producers can reinvest profits from the bitcoin mine into expanding the solar/wind farm.
Strengthening the Grid
The core idea here is that energy producers must overproduce to satisfy grid demand. Excess energy must be discharged into the ground as it will overheat and disrupt optimal grid function. In other words, energy producers MUST take a total loss on some % of the energy that they’re generating despite paying to generate it. This happens regardless of the kind of power plant (coal, wind, solar, hydro).
A bitcoin mine situated next to a power plant acts as a sponge or buffer for the grid’s operations.
Overproduction: The excess energy can be sold to the bitcoin network
Underproduction: The bitcoin mine can easily be shut off (curtailed)
This creates balance within the grid as well as at the energy production facility itself. Not only does it create balance, but it reduces waste. I can’t think of a better word than “waste” for energy that was produced but not used.
If that energy can be put to productive use by selling it to the bitcoin network, then that sounds like bitcoin is cutting down on waste not contributing to waste.
Reducing Costs for Consumers
A happy side effect of the above scenarios I’ve laid out is that energy companies can reduce waste and recoup costs. This, ideally would end up allowing them to reduce costs for the end consumer.
This is an ongoing problem in most developed places in the world. Close to home though, the power company Nova Scotia Power is set to raise energy rates by 14% within the next two years. Meanwhile, after speaking with some wind energy producers in Nova Scotia, some of them have their operations curtailed, meaning that they’re only allowed to run their mills at 60% capacity. It seems to me like we should be running renewable operations at near 100% capacity in order to accelerate the rate at which we decarbonize, not stifling that trend.
What I propose it installing bitcoin miners at our power stations, then using the proceeds to subsidize the rate hike, or more generally, the cost of energy for consumers.
Ideally, we use the proceeds to invest more in hydro, wind, and solar. But we need to take this one step at a time.
How do we execute on this vision?
The plan is relatively straight forward
Get an energy producer on board ( wind/solar/hydro )
Order miners ( investment required )
Deploy miners ( I can do this :) )
Manage miners — deploy proceeds
If you’re interested in helping with this vision, leave me a comment or send me an email to firstname.lastname@example.org
Also share this letter so that we can continue to have candid conversations about the misinformation surrounding bitcoin mining and its application in strengthening energy grids.
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