Two energy revolutions are currently taking place that are complementary: the human energy use revolution, as greener or more sustainable options become a priority in the face of climate change, and the Bitcoin revolution, which is setting a whole new frontier on how energy uses to add value create.
Solar energy in particular seems to be the pioneer for renewable bitcoin mining. For example, loyal Bitcoin industrial companies Blockstream and Square are building a multi-million dollar solar-powered mining facility.
However, it is difficult to say what percentage of the Bitcoin network’s total hash rate is generated by solar energy, although anecdotal evidence from RES Holdings solar developer Blake King suggests that there are new solar projects “everywhere” in the US
In a recent Compass Mining podcast, King noted that there really isn’t any data to determine exactly how much solar power is available, but he does hear that the grid lines are full with new solar companies trying to get in .
“It’s huge,” he said. “Gigawatts of solar come in everywhere.”
The latest energy data from the Cambridge Center For Alternative Finance shows that “a growing proportion of total electricity consumption comes from renewable energy sources such as hydro, solar or wind,” although the center notes that “the exact energy mix of the Bitcoin” mining industry remains unknown … Estimates differ considerably and range from around 20% to 30% of the total energy mix to more than 70% “
The potential for solar powered bitcoin mining
With the proportion of solar-powered hash rate likely to grow, many see the potential for using renewable energy in Bitcoin mining as a positive cycle – one where the unique incentives in Bitcoin mining that power its operations are the cheapest Using electricity will encourage more businesses around the world to switch to renewable energy sources such as solar energy.
And as governments agree to cut carbon emissions and introduce additional incentives such as tax credits for investment, the proportion of miners that use solar energy is likely to increase even further.
As Dan Frumkin, Head of Research and Content at Braiins and Slush Pool, recently wrote, Bitcoin can: [incentivize] Develop renewable energy around the world by providing a means of monetizing excess energy that would otherwise be wasted. “
Where does solar powered Bitcoin mining take place?
In an interview with Bitcoin Magazine, Frumkin said that there is no reliable data on where solar parks are, but there are some likely houses.
“I think the entire southwest is optimal for solar energy,” he said. “My home state New Mexico has around 300 days of sunshine a year and has many barren desert landscapes. There’s a lot of oil and gas production too, so I think it would be a great place to try a solar and exhaust hybrid operation to ensure availability even when the sun isn’t shining. “
The upcoming Blockstream and Square joint venture will be based in the state of Georgia.
Meanwhile, the solar energy industry association has listed the top ten states for solar power based on the cumulative installed solar capacity in the first quarter of 2021.
Anecdotally, we also know that West Texas is a solar and wind power plant and a new favorite mecca for companies hoping to mine Bitcoin.
The disadvantages of solar powered mining
In his written analysis, Frumkin noted that solar energy can be considered green and renewable, but also that there are significant problems with solar energy, including the limits of hours of sunshine. The following graph shows the availability of solar energy compared to other energy sources:
On the recent Compass Mining podcast, Frumkin and Blake explained that there are a number of ways you can fill the hours without sunlight (even when it’s cloudy or there are dust storms) to get the solar power economically viable.
Some companies are using a natural gas generator to fill these gaps and using an energy source that is relatively inexpensive but not renewable. Other miners have contracts or “Power Purchase Agreements” (PPAs) with their local energy networks to buy inexpensive electricity at low times at night, often for just two cents per kilowatt hour. This can be electricity that would otherwise go unused.
The following graph shows the estimated relative price of various energy sources according to the International Renewable Energy Agency:
Most solar energy companies use batteries to capture and store excess sunlight, and this works especially well for small businesses. But it is not a solution for major operations.
“A solar panel and battery system on someone’s roof will work fine to keep a couple of miners up and running,” Frumkin told Bitcoin Magazine. “If the solar park is much larger and is supposed to feed energy into the grid, then there is another source of demand for the electricity in these batteries and then things get complicated. This is the case that I have analyzed here where the battery power was reserved for the grid and the only electricity that could be used for mining was the surplus created after the grid needs were met and the batteries filled. In this case, I don’t think the risk-reward ratio in mining is attractive. “
Is solar power really green at all?
Although solar energy itself is considered “green” or renewable, coal is often used in the manufacture of solar panels and toxic waste is created as a by-product.
Most solar panels are made in China in the Xinjiang region (which until recently was also an epicenter of Bitcoin mining), where coal energy is abundantly available.
“In my opinion it is legitimate criticism,” said Frumkin about the environmental disadvantages of solar module manufacture. “A large part of the global production of solar modules takes place in Xinjiang and is very likely associated with slave labor by the Uyghur ethnic minority there as well as the use of a lot of coal power and toxic chemicals in the manufacturing process.”
Hence, the idea that solar power is actually a “green” alternative to Bitcoin mining could be a misunderstanding.
“It is still not correct to present solar energy as 100% clean, neither from an ecological nor from an ethical point of view,” said Frumkin. “Perhaps the tradeoffs are worth considering all factors, but it is rare that the negative factors are even mentioned in the mainstream media.”