Hydroelectric Power: How Crypto Mining Levels Up
When people start exploring Bitcoin more deeply, one of the biggest surprises is the outsize carbon footprint behind this otherwise progressive-minded payment system. Bitcoin’s transaction validation process known as mining, by design, calls for copious computational resources to be expended on the path to creating value.
Bitcoin and many other cryptocurrency miners need electricity—and a lot of it—to power their ultra-competitive Proof of Work consensus mechanism that helps make Bitcoin the standard against which all other cryptocurrencies are measured. A University of Cambridge tool estimated in 2019 that the Bitcoin network’s yearly energy usage was 61.76 terawatt-hours (TWh)—all of Switzerland, in comparison, consumes 58.46 TWh annually. A separate study equated that consumption to 22.9 million tons of annual carbon dioxide emissions, or roughly what the nation of Jordan emits in a year.
With so much electricity needed for Bitcoin mining, it follows that the more renewable energy that miners utilize to power their operations, the better. In a business based on optimizing for electricity, which typically represents between 60-70% of their operational expenses (Opex), Bitcoin miners actively seek out competition to fossil fuel-powered plants.
The benefits of renewable energy start with costs, which are generally less expensive than carbon-heavy sources such as coal, oil, and gas. According to a report by the International Renewable Energy Agency, fossil fuel generation costs can range between $0.05–$0.17 per kilowatt hour in G20 countries, while the costs of renewables in 2020 were projected to cost $0.03–$0.10 per kilowatt hour.
Additionally, because of the nature of renewable energy, it needs a reliable energy “sink” when demand is low but production is continuing apace, creating a surplus that often unfortunately goes unused. Crypto mining and data centers can provide a steady demand, allowing renewable energy facilities to maintain operations with minimal production curbing, creating a synergistic relationship between customer and supplier.
Miners’ options for going greener include the use of excess gas from oil mining; or greener still with solar or wind. The optimal renewable energy source for Bitcoin mining, however, just may be hydroelectric, which has demonstrated its ability to provide both plentiful and cost-effective power for major mining centers in China and Canada. As regions worldwide vie to host the next-generation bitcoin mining operations that are coming online, those with hydroelectric offerings could have the advantage.
How Hydroelectric Benefits Bitcoin
The edge for hydroelectric, also known as hydropower, as a renewable energy source for Bitcoin mining starts with reliability and predictability: Hydropower production is less impacted by fluctuations in power sources than solar power, which can suffer significant dips on a cloudy day, and cannot be collected at night. Similarly, unless a wind farm is constructed on a consistently windy site, it is subject to limited production on calm days.
Additionally, hydroelectric is on now: These facilities are already in place and often have excess capacity. Wind power, by contrast, is generally a ground-up build given the amount of energy required to power a crypto mine. If the business plan is to win with wind, it will take time to get up and running.
Not every hydropower site is interchangeable, however. As Bitcoin miners shop for the best home base, Washington State’s Columbia River is flexing its muscles as a mining mecca. EcoChain, a company focused on developing a network of cryptocurrency mining operations completely powered by renewable energy, is launching with a mine running off the power generated by 100% green hydroelectric power from a 1,300 MW dam in the Columbia River Basin. Consistent water flow is vital to crypto mining, and the Columbia River site has a very reliable flow from the Cascade Mountain Range that made it ideal for EcoChain.
Additionally, hydroelectric providers in the Columbia River Basin region are well attuned to the economic incentives of partnering with a crypto mining operation, enabling them to perform infrastructure improvements on their plant as well as other upgrades, based on the guaranteed revenue they will get from the relationship. That spirit of cooperation with the power source is vital for strengthening a Bitcoin mine’s business plan and prospects for success.
In EcoChain’s case, the Columbia River Basin has already proven itself as a safe bet, where many large data centers and other crypto miners are established and capitalizing on its abundant hydroelectric power. With many high-performing use cases in place, it was a relatively easy decision for EcoChain to acquire the assets of a mine that was already in the region and begin optimizing it for even greater efficiency.
In the crypto mining industry identifying and executing on efficiencies is everything. The inaugural EcoChain mining operation exemplifies the gains available when aggressive Capex and Opex optimization combine with hydropower proximity to create an ideal hash power HQ.
At EcoChain, infrastructure improvements and additional mining rigs are expected to help fully leverage the available power and raise capacity to almost 3X current operations—an impressive near-tripling right on the heels of the 2020 Bitcoin halving. It’s a clear demonstration of hydroelectric’s benefits to bitcoin mining: the right place and the right time for reliable power, driving progress for a fast-growing industry.
— EcoChain Mining