From Watts to Wealth: Bitcoin's Role in The Energy Transition

It is well known that the Bitcoin network is energy-intensive. The most recent figures indicate an annual electricity consumption of 138 TWh. To put this number into perspective, the consumption of households, industry, construction, etc. in a country like Norway amounts to 124 TWh per year.

This colossal level of electricity consumption has created a narrative that Bitcoin would be harmful to the environment. In reality, Bitcoin mining proves to be a huge ally for renewable energy sector and the best available strategy for energy transition.

In practice, Bitcoin mining increases the profitability of renewable energy projects at an early stage, prevents underutilization of renewable energy infrastructure, valorizes energy located in isolated areas of the world, and much more...

An overview in 5 points:

The world's greenest industry

Bitcoin mining is currently the world's greenest industry in terms of energy mix. According to original research by climate tech investor and entrepreneur Daniel Batten:

« Sustainable mining increased by 3.6% overall for the year 2023, reaching a new all-time high of 54.5%. »

This is a new historical record, which places Bitcoin as the only major global industry predominantly powered by green energies. In comparison, the share of renewable energy in the traditional banking system or the industrial sector stands at 39% and 32% respectively.

By offering potential additional income for renewable energy producers, Bitcoin proves to be the ideal candidate to drive energy transition.

If Bitcoin were a country it'd be the most sustainable in the world.

Profitability increase in the initial phase of renewable energy projects

The period between the construction of green electricity infrastructures and their full connection to the grid is very long. According to the Institute for Energy Research:

« Transmission lines take a very long time to build, especially compared to other parts of the energy infrastructure. Building new transmission lines takes between 5 and 15 years, including planning and permitting. »

Bitcoin mining enables the monetization of untapped potential in electricity infrastructures during their initial (and pre-commercial) phase. This advantage particularly impacts wind and solar farms, as well as hydroelectric and geothermal power plants which, although technically capable of producing electricity, cannot sell their full capacity due to incomplete grid connections, resulting in significant revenue loss for renewable energy projects.

For example, a recent report published by the financial think tank Carbon Tracker found that, in 2022, Britain wasted enough wind generation to power 1 million homes. All because investments in, and planning approvals for electricity grid upgrades are not keeping up with the rapid growth of wind power development.

Another example is Germany, where despite generating record amounts of clean energy in the north, its grid is too weak to transport all the power to load centers in the south - a longstanding challenge for the country that is worsening. The Federal Network Agency or Bundesnetzagentur, stated that a significant percentage of renewable energy intended for the grid is curtailed due to infrastructure deficiencies.

A final example is Texas, which currently has over 30 renewable energy projects that could generate a combined profit of around $50 million by mining Bitcoin during the pre-commercial period.

In short, electricity producers could generate millions of additional revenue by mining bitcoins during their pre-commercial phase. This revenue could then be reinvested in other renewable energy projects or used to reduce the average electricity bill for the population.

The lack of transmission infrastructure could cost Britain £3.5 billion a year by 2030.

Promoting electrification of rural areas

The literature on this subject is becoming more and more consistent in its results. In November 2023, a group of scientists from Cornell University in the United States determined that establishing Bitcoin mining operations in strategic locations reduces environmental footprint by generating additional revenue for renewable energy projects. This additional revenue is then directed towards new green energy projects.

As an example, consider Gridless, a Kenyan company that allows small hydroelectric power producers to sell 100% of their production capacity where, without the demand generated by Bitcoin mining, they could sometimes not even sell half of it.

This excellent 4-minute video by Bitcoin Shooter perfectly summarizes the situation: Bitcoin mining is an incredible tool for economic and social development in isolated regions that could not previously generate sufficient demand to justify the construction of electricity generation infrastructure.

Bitcoin mining is a tool for economic and social development in rural Africa.

Optimization of intermittent renewable energy production

This fourth point addresses the primary observation that led us to found Numeraire: energy demand exhibits significant fluctuations, and intermittent renewable energy sources, such as wind or solar, cannot adjust to demand in real-time. This mismatch between supply and demand results in suboptimal production and enormous electricity waste on a global scale.

Margot Paez, sustainability and environmental consultant, puts it best:

« There’s often a supply-demand mismatch that causes excess production of renewable power. Bitcoin mining acts as an off-taker that pays for the electricity that would otherwise be wasted. In turn, Bitcoin mining benefits from using renewable energy instead of fossil fuels, improving the network’s carbon footprint. »

By integrating Bitcoin mining into their business model, intermittent renewable energy producers gain the ability to balance grid demand by instantly turning on or off their ASICs (Bitcoin mining machines). This strategy, known as demand-response, plays a crucial role in maintaining grid stability and optimizing electricity production.

Such strategies not only optimize electricity production but also increase revenues and ultimately reduce tariffs for consumers. In the future, it will become the norm for every intermittent renewable energy producer to integrate Bitcoin mining into its economic model to remain competitive in an ever-changing market.

Bitcoin mining fuels the energy transition.

Bitcoin mining is location agnostic

Bitcoin mining can move wherever there is excess energy. ASICs are easily installed in shipping containers that can be deployed anywhere on earth: in the desert, in the forest, on an island, anywhere. All that is needed is an internet connection, which systems like Starlink now provide even in completely remote areas, such as deep in the Congo or the Amazon rainforest.

Bitcoin mining containers bring adjustable demand to electricity producers for a specified duration, months or years, and are then removed and installed on other sources when no longer needed.

A great example is the Virunga National Park in Congo, which was literally "saved" by Bitcoin mining through a collaboration with Sebastien Gouspillou's company, Big Block Green Services. This excellent MIT article perfectly expresses the astonishing connection that can exist between a national park lost in the jungle and Bitcoin mining. It unequivocally highlights the positive impact that Bitcoin has had on the fate of the Virunga National Park and its local community since 2020.

Bitcoin mining is a win-win-win solution for miners, electricity producers, and local communities: the former earn by selling their computing power to the Bitcoin network; the second generate unexpected income allowing them to finance, among other things, new infrastructure; and the latter increase their standard and quality of life.

Energy use is beneficial to Humanity

A sixth "bonus" point: using energy is not a bad thing, quite the opposite!

Throughout history, humans have benefited from their ability to identify and exploit energy sources: from the discovery of fire and wood combustion, to water-powered mills, whale oil for candle lighting, coal and steam engines, fossil fuels for internal combustion engines, to the discovery of the atom and nuclear energy.

The ability to harness the energy around us is one of the greatest indicators of a civilization's development. Are you familiar with the Kardashev scale? It is easy to demonstrate a positive correlation between human well-being and their ability to harness the energy around them.

As Trevor Stark aptly puts it: there is no such thing as a low-energy rich country. A study by Ross Ferguson, William Wilkinson, and Robert Hill proves this and concludes:

« Wealthy countries have a stronger correlation between electricity use and wealth creation than do poor countries... »

Bitcoin is a tremendous force for human development because it allows us to make the most of the energy around us by turning it into a financial resource. It is a condensed form of energy, tradable anywhere in the world, instantly.

Bitcoin mining allows every person, institution, or country with an energy source, regardless of origin and geographical location, to improve their financial condition by participating in securing the largest monetary network ever invented.

Electricity consumption is highly correlated to human development and freedom.

Conclusion

By monetizing surplus energy, Bitcoin mining will bring hundreds of millions of dollars to renewable energy producers in the coming years, fostering energy transition. Bitcoin makes renewable energy producers more competitive against fossil fuels, reducing the environmental impact of the electricity generation industry.

Bitcoin mining enables optimized consumption of the energy surrounding humans, improving their financial and social condition. Thanks to its characteristics, Bitcoin mining allows wasted, underutilized energy to be valued, acting as a facilitator towards more efficient and sustainable energy use. Bitcoin is the only way to become a type 1 civilization on the Kardashev scale.

As the Bitcoin mining industry continues to prove itself a positive force, it will inevitably become more understood, accepted, and then embraced.