Bitcoin mining can be profitable if you generate energy

The Finger Lake region of New York is known for its wine and glacial streams. It is a nice place. And it now houses one of the largest Bitcoin mining facilities in the United States

Greenidge Generation is a former coal-fired power plant converted to natural gas. They provide electricity to New York State residents. Every day Greenidge has to bid in a competitive energy market – sometimes, it makes a profit when energy demand is higher. The company has been in business since 1937 but has suffered from cheaper energy sources over the past decade. The plant was shut down in March 2011. Competition from cheaper shale natural gas supplies and coal exports from China put the old company in economic difficulty. Atlas Holdings bought the plant in 2014 and converted it to natural gas in 2017.

Atlas, which buys and transforms struggling industrial companies, has helped transform the company into a more efficient energy model. But the profits were always limited. It was in 2018 that CEO Dale Irwin and CFO Tim Rainey came up with the idea of ​​using the excess capacity to mine Bitcoin. This was a unique idea in the United States. Rainey says, “Cryptocurrency mining was an idea that evolved as a result of discussions with our board and leadership team as we explored how best to use the unique assets we have in the facility. Our council approved a plan to pursue Bitcoin mining. “

Dale Irwin said: “We started with a couple of S9s and some GPU rigs in early 2018 to familiarize ourselves with the economics of machines and learn how to use and run them. We turned it into a small test pilot of several hundred machines from many different manufacturers in May 2019. After the completion and analysis of the pilot test, we built the current data center within four months, starting our large-scale mining operation in January 2020. “Currently there are 8,500 miners operating. latest generation from Bitmain and other manufacturers.

Greenidge is using over 20 megawatts (MW) of energy to mine Bitcoin, making it the largest energy company in the United States with this type of strategy. In comparison, 20 MW is not very big, alongside other countries. There are bigger Bitcoin mining facilities. The University of Cambridge’s Bitcoin Electricity Consumption Index shows that global energy consumption is estimated at 7.25 gigawatts (GW), while China uses just over 71% of the global total.

Riot Blockchain, by comparison, said in their July 16, 2020 press release that their overall power consumption would be 12.8 megawatts.

The company buys natural gas through forward contracts that set a threshold price. Electricity production costs will fluctuate and influence the decision to mine cryptocurrencies or sell energy to the grid.

Greenidge wants to increase its energy consumption. The company plans to utilize the plant’s total capacity of 104 MW next year.

Bitcoin and cryptocurrency mining is an energy-intensive enterprise. Some argue that it is a waste of energy and that digital assets are purely an environmental drain. According to some estimates, a megawatt could power about 800 homes a year on average. But this is a difficult statistic to estimate; electricity consumption changes according to the region and the need.

The company calls itself a hybrid powerhouse-mine, where it can generate more value by being able to power the New York grid or my cryptocurrency. The choice of one or the other depends on what is most profitable in the day. Irwin went on to say: “Without cryptocurrency mining, it was not economically feasible for us to supply capacity and power to the state grid all year round and continue to provide employment opportunities to the local community, which provides the majority of our workforce. “.

Rainey said, “Since both cryptocurrency markets and energy markets are constantly fluctuating, we do what is most profitable at any given time: we sell the generated power or mine the cryptocurrency with that power. Even if there is no one. Fixed threshold of revenue from the sale of energy that would cause us to sell energy instead of my cryptography, currently that number would be more than $ 100 per MWh of energy we generate. “

This model is unique in that Bitcoin mining is not a trend in the energy sector. If there are other power companies in similar situations, could this be a sustainable way to increase income?

Tim Rainey said: “Without the mining operation, we would not be running most of the time, but if we were running 24/7, all year round, we would generate revenue of around $ 20 / MWh. Bitcoin mining revenue. with state-of-the-art hardware it ranges from $ 70 / MWh to north of $ 200 / MWh depending on price, global hashrate and difficulty. “

Time will tell, but Rainey added, “We were able to get over $ 500,000 in additional revenue during the hours we otherwise wouldn’t have been sent to be online. Plus, we’re unique in that the highly skilled engineers themselves, too. the electricians and other technicians who manage the plant on site 24/7 help run and maintain the mining hardware. “