Arcane Research – a digital asset analysis firm – has published a report examining Bitcoin mining, and its relationship with global energy.
The paper argues that the mining industry can transform worldwide energy production for the better – contrary to its frequent portrayal as a social and environmental harm.
Reinforcing the Grid and Renewable Technologies
The report, published on Wednesday, provides four ways in which mining can improve energy systems in a desirable and economical fashion.
The first is stability: miners can act as a buyer of last resort for unreliable, non-controllable energy sources, such as wind and solar. This is due to the constant electricity demand provided by miners, and the low cost of immediately reacting to any given supply shock at any granularity.
Miner reactivity also allows the industry to give energy back to the grid when demand is too high. For instance, industrial miners in Texas collectively powered down in July to help protect the grid during a heatwave, as part of a state-wide demand response program.
Such reactivity will be especially important over the years to come, as the world increasingly transitions away from flexible fossil fuels to non-flexible renewables. Thanks to proof of work, stranded renewable energy sources can become profitable by leveraging the location agnosticism, modularity, and interuptibility of miners.
“Bitcoin miners can seek out areas with excess wind and solar and build a data center of the exact size needed to consume the surplus energy,” explained the report.
Recycling Gas and Heat
Miners don’t only support renewables, but also make oil drilling a cleaner and more efficient process.
Oil drilling frequently produces natural gas that cannot always be economically harnessed for consumption. As such, oil producers are forced to flare the gas, deriving no economic utility and polluting the environment in the process.
By contrast, if oil producers opted to use natural gas for mining, they could both profit and reduce the greenhouse gas emissions associated with the byproduct. Once again, mining is uniquely suited to this function for its location agnosticism, modularity, and portability.
Oil field Bitcoin mining has been growing especially fast in the United States and Canada over recent years. Exxon – a major multinational oil and gas corporation – expressed plans to use Bitcoin mining for this express purpose in March.
The primary motivation among the oil industry appears to be emissions reduction. Data from Crusoe energy shows that it is the clear most economically efficient method for reducing emissions – over 4X more effective than wind investment, and over 6X more effective than solar investment.
But just as oil drilling produces natural gas as a byproduct, Bitcoin mining produces heat as a byproduct.
This provides another economic resource-recycling opportunity. Bitcoin miners can potentially use heat recovery for district heating while subsidizing those heating costs with the Bitcoin it generates.
Furthermore, if those miners are powered by renewable sources, then the industry can effectively reduce the carbon emissions associated with heating – the world’s single largest source of CO2 emissions.
“Repurposing the heat from bitcoin mining is essentially using the same energy twice,” explained Arcane. “This offsets energy used by the bitcoin mining industry since it outcompetes other miners that are not repurposing their heat.”