Solar Power Drives Bitcoin Mining Profit - Bitcoin Magazine

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New US Bitcoin Mining Hardware Creates B Opportunity, Could Disrupt China’s Mining Dominance: Bernstein – Canaan (NASDAQ:CAN)

New US Bitcoin Mining Hardware Creates $20B Opportunity, Could Disrupt China’s Mining Dominance: Bernstein – Canaan (NASDAQ:CAN)

30 July 2024

This is an opinion editorial by Ali Chehrehsaz, a mechanical engineer with 16 years of experience in the energy industry.

This article will outline how collecting solar energy and storing it can provide a powerful dynamic for bitcoin mining operations by outlining that:

Hybrid power plants that pair electrical generation, especially solar, with batteries are growing rapidly
Bitcoin mining will be incorporated in these plants alongside batteries, for the same reasons
Incorporating bitcoin mining as well as batteries requires proper sizing of deployed assets, and also splitting energy between batteries, mining and the grid in a way that optimizes revenue
The path forward will not be technically or commercially simple, but the opportunity is massive

Hybrid Power Plants

There is a new breed of power plant on the rise: batteries are being co-located with wind, solar photovoltaic (“PV”), fossil fuels, etc. to create what are referred to as “hybrid power plants.” Among these hybrid power plants, solar-plus-battery plants are the fastest-growing segment.

Lawrence Berkeley National Labs (LBNL) recently published findings in 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 in terms of plant number (140), storage capacity (2.2 GW [gigawatts]/7.0 GWh [gigawatt hours]), storage:generator capacity ratio (53%), and storage duration (3.2 hours). ”

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The briefing goes on to state that: “Last year was a breakout year for PV+storage hybrids in particular: 67 of the 74 hybrids added in 2021 were PV+storage. By the end of 2021, there was more GW of battery capacity operating in PV+storage hybrids (2.2 GW) than as standalone storage plants (1.8 GW). Much of the battery capacity added in hybrid form in 2021 was a battery retrofit to a pre-existing PV plant.”

This last point is noteworthy, and we will come back to discuss it later.

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This trend is continuing and, as the article points out, there were more than 670 GW of solar plants in the interconnection queues in the U.S. as of the end of 2021.

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Prisoners Of Time And Geography

Why are batteries being added to solar plants at such a rapid rate? There are two factors at play: deflation in the value available for solar energy and the ever-increasing competitiveness within the solar industry.

Problem One: Solar Value Deflation

What is solar value deflation? The LBNL briefing provides a hint: “…[PV+storage] can be found throughout much of the country… though the largest such plants are in California and the West…” In a word: geography.

Solar power in locations like California, Nevada and Arizona is suffering from an anti-network effect. The anti-network effect of solar occurs in a market when penetration of solar in a location reaches a market-specific tipping point, after which the addition of new solar capacity reduces the benefit (i.e., value of solar generation) for all solar plants in that market. In its 2021 “Utility Scale Solar” report, LNBL demonstrates this problem in more detail.

As solar penetration on a grid increases, the value that solar power can capture decreases. This leads us to another hint: time. The hours during which any given solar generator can produce electricity are, by definition, the same hours that every other nearby solar generator can produce electricity, which end up becoming the hours for which the market is oversupplied and prices are lower.

This is why renewables are, in a way, prisoners of time and geography. See the example of California outlined by LNBL: At 22% penetration, solar power can only capture 75% of the value of generation with a baseload 24/7 power profile. The problem is already visible in other markets at penetrations as low as 5%.