Bitcoin Mining & Energy: A Grid-Balancing Intersection of Two Industries

Answering the call for controllable loads to balance the grid, Bitcoin miners and electricity providers are both looking to maximize profitability while providing solutions to grid instability. In this content series, Foundry and CWP Energy Solutions discuss how both industries can work together toward a more reliable future.

Authored by Brittany W. & Christopher O'Donnell.

What’s the problem with the grid today?

Since the grid needs an equal balance of electrical supply and demand to consistently provide power to consumers, uncontrollable energy sources — such as wind and solar — pose difficulties for grid balancing. The increase in reliance on weather-dependent renewable energy sources makes it difficult for power companies to supply the correct amount of electricity to the grid.

Consequentially, imbalances in the supply and demand of electricity lead to transmission congestion, energy price volatility, and ultimately, brownouts and blackouts. Bitcoin miners and utility-scale power producers can work together to restore the balance needed for a stabilized electrical grid and enable the consistent delivery of electricity to consumers.

Let’s look at both industries at a high level.

Prerequisites

• Bitcoin (BTC) is a peer-to-peer electronic cash system that eliminates the need for centralized intermediaries such as banks. This form of digital currency uses blockchain technology to support transactions between users on a decentralized network.
• Bitcoin Mining is the process in which new transactions (blocks) are validated and added to the blockchain. This is accomplished through Bitcoin’s proof-of-work consensus mechanism, which rewards Bitcoin miners for using compute power to settle transactions.
• Wholesale Electricity Markets refer to de-regulated regions across North America, commonly referred to as Independent System Operators (ISOs), in which electricity is sold by generators and purchased by large consumers of electricity.
• Electrical Grid refers to the network of infrastructure (e.g., transmission lines, power wires, etc.) that connects power generators to power consumers (e.g., households and businesses).

How Miners Use Energy

The Bitcoin network, like any industry, requires energy to operate safely and effectively. Bitcoin miners perform computationally intensive tasks to settle transactions, ensuring the network’s security. The transactions are clustered into blocks and chained together, creating a long history of all peer-to-peer transactions — often referred to as the Bitcoin blockchain or a ledger.

Since the Bitcoin network is not owned or controlled by any single entity, its cumulative use of energy prevents it from being hacked or falsified. This is revolutionary since centrally controlled intermediaries, such as banks, aren’t needed to transmit value between two parties.

What are wholesale electricity markets, and how do they relay into Bitcoin mining?

Traditionally, miners purchased energy directly from utility companies at fixed rates, similar to how most households pay energy bills each month. However, as the mining landscape expands, it’s more profitable for miners to purchase electricity directly from the wholesale market, where power generators sell electricity.

With lowered energy costs, miners can maximize profitability while simultaneously stabilizing the grid by acting as controllable loads.

How can Bitcoin miners address irregular energy supply and demand?

As controllable loads, Bitcoin miners can serve as a valuable grid resource and are part of the solution to the growing instability of our energy infrastructure. As more uncontrollable renewable energy sources come online, controllable loads (such as Bitcoin miners) will play a crucial role in stabilizing the electricity grid. Mining machines can be powered on and off to level the energy supply in proportion to demand at any given moment.

Conclusion

CWP Energy Solutions and Foundry recognize how both the Bitcoin miners and wholesale electricity markets can offer solutions to stabilize the grid as more uncontrollable, renewable energy sources come online. In the coming months, we’ll dive deeper into how both industries can answer the call for controllable loads to balance the grid. Be sure to follow the Foundry Insights blog for more information.

About Foundry

Headquartered in Rochester, NY, Foundry Digital LLC is a digital asset mining and staking company focused on empowering a decentralized infrastructure. The DCG subsidiary leverages its industry relationships and market intelligence to empower institutions with the tools they need to mine and stake digital assets. For more information, please visit foundrydigital.com.

About CWP Energy Solutions

CWP Energy Solutions works closely with top industry miners, utilizing trading expertise and active asset management to reduce power costs, mitigate market risk exposure, and increase mining revenues. Its active asset management services utilize algorithmic automation to ensure optimal position of generating, storage, and load resources alike. For more information, please visit cwpenergysolutions.com.

Disclaimer

The contents of this post have been provided by Foundry Digital LLC (“Foundry” or “we”) for informational purposes only, and should not be construed as giving legal, financial or any other kind of advice. Although we strive to provide quality information, we do not guarantee or warrant any particular results from the use of this information or any opinions provided. Foundry accepts no liability whatsoever for any damages, costs or any other consequences resulting from any actions taken on the basis of the information or opinions provided. Furthermore, Foundry has no control over information provided in any third-party sites linked herein, and Foundry accepts no liability whatsoever over any consequences resulting from any actions taken on the basis of that information. Foundry reserves the right to make changes to this information at any time without prior notice and makes no commitment to update the information contained in this post.