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Bitcoin and Energy
Block Green's thesis on Bitcoin and energy consumption
In recent years there has been a heated public discussion around Bitcoin’s high energy consumption, with the popular claim that the Bitcoin network already exceeds the energy demands of smaller countries like the Netherlands or Finland.
However, among parties more familiar with the matter, the perspective on Bitcoin and energy is much more nuanced and less negative. For instance, Bitcoin mining is uniquely well-positioned to help make renewable energy cheaper, more accessible, and more stable, in doing so accelerating the world’s transition to sustainable energy sources. In fact, Bitcoin mining can act as a valuable catalyst to help global energy markets accelerate their renewable transition.
The intermittency of renewables is a major issue for grid operators working to balance supply and demand. Energy production from renewable sources varies heavily throughout each day due to constantly changing supply of wind and sunshine. In the past it was easier to balance the grid as energy production relied more heavily on energy from fossil fuels, which can generate power on-demand. As the grid transitions away from fossil fuels, the rising intermittency is becoming a real challenge for grid operators and societies.
Bitcoin mining can provide a solution for this challenge. When energy supply is high, miners can flexibly monetize cheap excess energy by switching on their data centers. When supply is low, dispatchable generation can bring the grid back to balance. Historically dispatchable generation has been done through natural gas, hydro and nuclear. To use these energy sources simply to balance the grid is inefficient and costly, standby time means wasted capacity. Bitcoin mining gives these plants a way to monetize standby power and stay online to meet demand.
We believe that we need to shed light on the benefits of Bitcoin mining. As a popular article recently covered, “Bitcoin’s energy consumption is a feature, not a bug”, Bitcoin mining can produce great positive externalities and fasten the shift to a more sustainable energy grid.