Bitcoin Miners Should Take Solar Energy Plus Storage More Seriously

Bitcoin miners present person a lucrative accidental arsenic the inclination successful pairing batteries with star vigor plants accelerates.

This is an sentiment editorial by Ali Chehrehsaz, a mechanical technologist with 16 years of acquisition successful the vigor industry.

This nonfiction volition outline however collecting star vigor and storing it tin supply a almighty dynamic for bitcoin mining operations by outlining that:

• Hybrid powerfulness plants that brace electrical generation, particularly solar, with batteries are increasing rapidly
• Bitcoin mining volition beryllium incorporated successful these plants alongside batteries, for the aforesaid reasons
• Incorporating bitcoin mining arsenic good arsenic batteries requires due sizing of deployed assets, and besides splitting vigor betwixt batteries, mining and the grid successful a mode that optimizes revenue
• The way guardant volition not beryllium technically oregon commercially simple, but the accidental is monolithic

Hybrid Power Plants

There is simply a caller breed of powerfulness works connected the rise: batteries are being co-located with wind, star photovoltaic (“PV”), fossil fuels, etc. to make what are referred to arsenic “hybrid powerfulness plants.” Among these hybrid powerfulness plants, solar-plus-battery plants are the fastest-growing segment.

Lawrence Berkeley National Labs (LBNL) precocious published findings successful a briefing titled “2021 Was A Big Year For Hybrid Power Plants — Especially PV+Storage.” In the article, it mentioned: “Among the operational generator+storage hybrids, PV+storage dominates successful presumption of works fig (140), retention capableness (2.2 GW [gigawatts]/7.0 GWh [gigawatt hours]), storage:generator capableness ratio (53%), and retention duration (3.2 hours). ”

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The briefing goes connected to authorities that: “Last twelvemonth was a breakout twelvemonth for PV+storage hybrids successful particular: 67 of the 74 hybrids added successful 2021 were PV+storage. By the extremity of 2021, determination was much GW of artillery capableness operating successful PV+storage hybrids (2.2 GW) than arsenic standalone retention plants (1.8 GW). Much of the artillery capableness added successful hybrid signifier successful 2021 was a battery retrofit to a pre-existing PV plant.”

This past constituent is noteworthy, and we volition travel backmost to sermon it later. 

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This inclination is continuing and, arsenic the nonfiction points out, determination were much than 670 GW of star plants successful the interconnection queues successful the U.S. arsenic of the extremity of 2021.

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Prisoners Of Time And Geography

Why are batteries being added to star plants astatine specified a accelerated rate? There are 2 factors astatine play: deflation successful the worth disposable for star vigor and the ever-increasing competitiveness wrong the star industry.

Problem One: Solar Value Deflation

What is star worth deflation? The LBNL briefing provides a hint: “...[PV+storage] tin beryllium recovered passim overmuch of the country... though the largest specified plants are successful California and the West...” In a word: geography. 

Solar powerfulness successful locations similar California, Nevada and Arizona is suffering from an anti-network effect. The anti-network effect of star occurs successful a marketplace erstwhile penetration of star successful a determination reaches a market-specific tipping point, aft which the summation of caller star capableness reduces the payment (i.e., worth of star generation) for each star plants successful that market. In its 2021 “Utility Scale Solar” report, LNBL demonstrates this occupation successful much detail.

As star penetration connected a grid increases, the worth that star powerfulness tin seizure decreases. This leads america to different hint: time. The hours during which immoderate fixed star generator tin nutrient energy are, by definition, the aforesaid hours that each different adjacent star generator tin nutrient electricity, which extremity up becoming the hours for which the marketplace is oversupplied and prices are lower. 

This is wherefore renewables are, successful a way, prisoners of time and geography. See the illustration of California outlined by LNBL: At 22% penetration, star powerfulness tin lone seizure 75% of the worth of procreation with a baseload 24/7 powerfulness profile. The occupation is already disposable successful different markets astatine penetrations arsenic debased arsenic 5%. 

All markets are heading successful this direction. Owners of existing oregon planned star projects request to find ways to hedge this hazard and diversify their gross streams. 

Problem Two: Extreme Competition

The different origin is the occurrence of solar, creating an highly competitory manufacture that is present challenging further growth.

The star manufacture started overmuch aboriginal than different powerfulness procreation industries and has had to drawback up to gain its stock of the powerfulness procreation mix. The manufacture has been utilizing the levelized outgo of vigor (LCOE) metric to comparison its costs to coal, earthy state and different procreation sources.

Solar became the lowest LCOE signifier of procreation successful the past decade and this has been driving the unthinkable maturation of star capacity. But the contention with different procreation sources continues wrong the manufacture itself, creating a contention to the bottommost which is eroding the returns for investors successful solar. The pursuing illustration is from an nonfiction by Lazard titled “Levelized Cost Of Energy, Levelized Cost Of Storage, And Levelized Cost Of Hydrogen” which shows the accelerated driblet successful star levelized outgo of electricity:

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A continued simplification successful star LCOE translates into a downward trajectory of revenues from star plants. As such, investors successful star are looking for ways to summation profits wrong the confines of the powerfulness market. Batteries are 1 specified exertion that provides a way to higher revenues done arbitrage, request effect and ancillary services.

The Roadmap For Bitcoin Miners

What is the accidental for bitcoin miners? The mode that retention has dovetailed neatly into the star worth stack provides a utile roadmap for bitcoin miners to follow. Bitcoin mining tin besides supply akin opportunities for star plants to entree higher profits by operating arsenic a flexible assets for the grid.

But due to the fact that batteries person a fixed retention capableness and supply a short-term vigor arbitrage accidental against the section powerfulness grid, eventually, adjacent a artillery indispensable instrumentality the section grid marketplace prices. Bitcoin mining has nary retention bounds (allowing semipermanent arbitrage) and tin supply arbitrage anyplace connected the globe (more connected that topic: “Bitcoin Is The First Global Market For Electricity”).

The pairing of bitcoin mining and star is elemental successful rule but making the physics and concern enactment successful signifier is not easy. To make accretive returns, Bitcoin miners request to accurately size their deployments erstwhile co-locating with star and artillery hybrid plants. The co-location strategy requires an knowing and prediction of the measurement of energy accumulation from the star works and the associated worth of each portion of vigor produced by the plant. This indispensable beryllium done connected some a semipermanent and a short-term (near real-time) basis, to enactment design/investment and operations. In summation to the probabilistic accumulation measurement of solar, knowing the worth of vigor astatine each interval indispensable beryllium understood (e.g., five-minute period); e.g., worth tin alteration wide and astatine times tin scope $0 per kilowatt hr (kWh) owed to curtailments.

A broadside enactment connected upwind and star curtailments: Below is simply a illustration from BTU Analytics showing that upwind and solar curtailments are increasing arsenic much intermittent renewables are deployed connected the Electric Reliability Council of Texas (ERCOT) grid. The astir impacted upwind and star plants saw 29% and 21% (respectively) of their full yearly procreation curtailed successful 2021 to 2022!

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 Co-optimization for integrating bitcoin mining is simply a situation worthy solving for miners fixed the emergence of star and artillery hybrid plants successful the premix of caller procreation sources. This inclination is apt to turn astatine an exponential rate.

In summary, expanding deflation successful value and rise successful competition of star person incentivized the pairing of batteries with existing star plants. Now determination is simply a caller inducement that volition accelerate the maturation of artillery paired hybrid plants. 

What we person seen to day has taken spot wrong the pre–Inflation Reduction Act (IRA) era. The IRA recently allows for a 30% concern taxation recognition (ITC) inducement for standalone batteries implicit the adjacent 10 years which volition boost the redevelopment of existing star plants to go hybrid plants.

As mentioned earlier, artillery retrofit to existing star plants is an emerging segment. This conception volition turn adjacent faster implicit the adjacent decennary with the caller ITC incentive. The caller inducement positive the concern successful U.S.-based manufacturing of star and batteries is poised to marque the U.S. the starring federation successful star and retention powerfulness plants. Bitcoin miners person a immense accidental to pat into 1 of the astir rapidly increasing forms of vigor procreation by figuring retired the physics and concern of co-locating with star and retention powerfulness plants.

This is simply a impermanent station by Ali Chehrehsaz. Opinions expressed are wholly their ain and bash not needfully bespeak those of BTC Inc oregon Bitcoin Magazine.