Bitcoin Miners Should Take Solar Energy Plus Storage More Seriously

That is an opinion editorial by Ali Chehrehsaz, a mechanical engineer with 16 years of expertise within the vitality trade.
This text will define how accumulating photo voltaic vitality and storing it might probably present a strong dynamic for bitcoin mining operations by outlining that:
- Hybrid energy vegetation that pair electrical era, particularly photo voltaic, with batteries are rising quickly
- Bitcoin mining can be integrated in these vegetation alongside batteries, for a similar causes
- Incorporating bitcoin mining in addition to batteries requires correct sizing of deployed belongings, and likewise splitting vitality between batteries, mining and the grid in a approach that optimizes income
- The trail ahead is not going to be technically or commercially easy, however the alternative is very large
Hybrid Energy Vegetation
There’s a new breed of energy plant on the rise: batteries are being co-located with wind, photo voltaic photovoltaic (“PV”), fossil fuels, and many others. to create what are known as “hybrid energy vegetation.” Amongst these hybrid energy vegetation, solar-plus-battery vegetation are the fastest-growing phase.
Lawrence Berkeley Nationwide Labs (LBNL) not too long ago printed findings in a briefing titled “2021 Was A Huge 12 months For Hybrid Energy Vegetation — Particularly PV+Storage.” Within the article, it talked about: “Among the many operational generator+storage hybrids, PV+storage dominates when it comes to plant quantity (140), storage capability (2.2 GW [gigawatts]/7.0 GWh [gigawatt hours]), storage:generator capability ratio (53%), and storage period (3.2 hours). ”
The briefing goes on to state that: “Final 12 months was a breakout 12 months for PV+storage hybrids particularly: 67 of the 74 hybrids added in 2021 have been PV+storage. By the tip of 2021, there was extra GW of battery capability working in PV+storage hybrids (2.2 GW) than as standalone storage vegetation (1.8 GW). A lot of the battery capability added in hybrid kind in 2021 was a battery retrofit to a pre-existing PV plant.”
This final level is noteworthy, and we are going to come again to debate it later.
This development is constant and, because the article factors out, there have been greater than 670 GW of photo voltaic vegetation within the interconnection queues within the U.S. as of the tip of 2021.
Prisoners Of Time And Geography
Why are batteries being added to photo voltaic vegetation at such a fast fee? There are two components at play: deflation within the worth obtainable for photo voltaic vitality and the ever-increasing competitiveness inside the photo voltaic trade.
Downside One: Photo voltaic Worth Deflation
What’s photo voltaic worth deflation? The LBNL briefing gives a touch: “…[PV+storage] will be discovered all through a lot of the nation… although the biggest such vegetation are in California and the West…” In a phrase: geography.
Solar energy in places like California, Nevada and Arizona is affected by an anti-network impact. The anti-network impact of photo voltaic happens in a market when penetration of photo voltaic in a location reaches a market-specific tipping level, after which the addition of latest photo voltaic capability reduces the profit (i.e., worth of photo voltaic era)for all photo voltaic vegetation in that market. In its 2021 “Utility Scale Photo voltaic” report, LNBL demonstrates this downside in additional element.
As photo voltaic penetration on a grid will increase, the worth that solar energy can seize decreases. This leads us to a different trace: time. The hours throughout which any given photo voltaic generator can produce electrical energy are, by definition, the identical hours that each different close by photo voltaic generator can produce electrical energy, which find yourself changing into the hours for which the market is oversupplied and costs are decrease.
For this reason renewables are, in a approach, prisoners of timeand geography. See the instance of California outlined by LNBL: At 22% penetration, solar energy can solely seize 75% of the worth of era with a baseload 24/7 energy profile. The issue is already seen in different markets at penetrations as little as 5%.
All markets are heading on this route. Homeowners of current or deliberate photo voltaic tasks want to search out methods to hedge this danger and diversify their income streams.
Downside Two: Excessive Competitors
The opposite issue is the success of photo voltaic, creating a particularly aggressive trade that’s now difficult additional progress.
The photo voltaic trade began a lot later than different energy era industries and has needed to catch as much as earn its share of the ability era combine. The trade has been utilizing the levelized value of vitality (LCOE) metric to match its prices to coal, pure gasoline and different era sources.
Photo voltaic grew to become the bottom LCOE type of era within the final decade and this has been driving the unbelievable progress of photo voltaic capability. However the competitors with different era sources continues inside the trade itself, making a race to the underside which is eroding the returns for traders in photo voltaic. The next chart is from an article by Lazard titled “Levelized Price Of Vitality, Levelized Price Of Storage, And Levelized Price Of Hydrogen” which exhibits the fast drop in photo voltaic levelized value of electrical energy:
A continued discount in photo voltaic LCOE interprets right into a downward trajectory of revenues from photo voltaic vegetation. As such, traders in photo voltaic are searching for methods to extend income inside the confines of the ability market. Batteries are one such know-how that gives a path to larger revenues by way of arbitrage, demand response and ancillary companies.
The Roadmap For Bitcoin Miners
What’s the alternative for bitcoin miners? The way in which that storage has dovetailed neatly into the photo voltaic worth stack gives a helpful roadmap for bitcoin miners to comply with. Bitcoin mining may present related alternatives for photo voltaic vegetation to entry larger income by working as a versatile useful resource for the grid.
However as a result of batteries have a hard and fast storage capability and supply a short-term vitality arbitrage alternative in opposition to the native energy grid, finally, even a battery should take the native grid market costs. Bitcoin mining has no storage restrict (permitting long-term arbitrage) and might present arbitrage wherever on the globe (extra on that matter: “Bitcoin Is The First World Market For Electrical energy”).
The pairing of bitcoin mining and photo voltaic is straightforward in precept however making the physics and finance work in follow shouldn’t be simple. To create accretive returns, Bitcoin miners must precisely dimension their deployments when co-locating with photo voltaic and battery hybrid vegetation. The co-location technique requires an understanding and prediction of the quantity of electrical energy manufacturing from the photo voltaic plant and the related worth of every unit of vitality produced by the plant. This have to be finished on each a long-term and a short-term (close to real-time) foundation, to help design/funding and operations. Along with the probabilistic manufacturing quantity of photo voltaic, figuring out the worth of vitality at every interval have to be understood (e.g., five-minute interval); e.g., worth can range extensively and at occasions can attain $0 per kilowatt hour (kWh) because of curtailments.
A aspect be aware on wind and photo voltaic curtailments: Under is a chart from BTU Analytics displaying that wind and photo voltaic curtailments are rising as extra intermittent renewables are deployed on the Electrical Reliability Council of Texas (ERCOT) grid. Essentially the most impacted wind and photo voltaic vegetation noticed 29% and 21% (respectively) of their complete annual era curtailed in 2021 to 2022!
Co-optimization for integrating bitcoin mining is a problem price fixing for miners given the rise of photo voltaic and battery hybrid vegetation within the combine of latest era sources. This development is prone to develop at an exponential fee.
In abstract, rising deflation in worth and rise in competitors of photo voltaic have incentivized the pairing of batteries with current photo voltaic vegetation. Now there’s a new incentive that can speed up the expansion of battery paired hybrid vegetation.
What we have now seen up to now has taken place inside the pre–Inflation Discount Act (IRA) period. The IRA newly permits for a 30% funding tax credit score (ITC) incentive for standalone batteries over the subsequent ten years which is able to increase the redevelopment of current photo voltaic vegetation to turn out to be hybrid vegetation.
As talked about earlier, battery retrofit to current photo voltaic vegetation is an rising phase. This phase will develop even quicker over the subsequent decade with the brand new ITC incentive. The brand new incentive plus the funding in U.S.-based manufacturing of photo voltaic and batteries is poised to make the U.S. the main nation in photo voltaic and storage energy vegetation. Bitcoin miners have an enormous alternative to faucet into some of the quickly rising types of vitality era by determining the physics and finance of co-locating with photo voltaic and storage energy vegetation.
It is a visitor put up by Ali Chehrehsaz. Opinions expressed are fully their very own and don’t essentially mirror these of BTC Inc or Bitcoin Journal.