Bitcoin, specifically the mining process gets a lot of flack for its energy usage. However, Bitcoin mining can help alleviate one of the greatest challenges facing renewable energy – the Duck Curve. 🧵 
The Duck Curve ELI5
Energy from renewables is inconsistent and peaks at inconvenient times. Solar peaks during the midday and wind in the middle of the night.
But, peak demand occurs in the morning and in the late afternoon which is opposite from renewable energy generation.
Energy from renewables is inconsistent and peaks at inconvenient times. Solar peaks during the midday and wind in the middle of the night.
But, peak demand occurs in the morning and in the late afternoon which is opposite from renewable energy generation.
Renewables now provide an excessive amount of renewable energy from solar and wind during the middle of the day which screws up the economics of electricity generation because the net energy production (grid load) continues to increase without any outlet.
This results in the “Duck Curve” where there’s too much energy being generated which ends up getting curtailed – wasted – or sold at negative prices.
Conversely, as demand rises at the end of the day, generators scramble to ramp up energy load, typically utilizing fossil fuels.
Conversely, as demand rises at the end of the day, generators scramble to ramp up energy load, typically utilizing fossil fuels.
Texas is the largest producer of renewable energy and has a deregulated energy grid which increases competition and so the Duck Curve – and the fate of renewables – is an even larger dilemma.
The Solution
Bitcoin mining provides a mechanism known as demand response:
• Bitcoin mining consumes energy constantly
• Bitcoin mining operation is a flexible load, meaning it is
relatively easy to shut down since it doesn’t require any
sort of continuous operations.
Bitcoin mining provides a mechanism known as demand response:
• Bitcoin mining consumes energy constantly
• Bitcoin mining operation is a flexible load, meaning it is
relatively easy to shut down since it doesn’t require any
sort of continuous operations.
Layer1 is capitalizing on this use case by negotiating with ERCOT – the Texas energy grid regulator – for long term demand response contracts. Essentially, Layer1 agrees to shut down at a moment’s notice while collecting an annual premium based on their expected power demand.
How does this help?
Demand response helps stabilize the energy grid by removing price spikes, leveling energy demand, and realign economic incentives – reduce negative pricing – that allow for the continued growth of renewable energy sources.
Demand response helps stabilize the energy grid by removing price spikes, leveling energy demand, and realign economic incentives – reduce negative pricing – that allow for the continued growth of renewable energy sources.
Now, Layer1’s strategy comes with the obvious downside that their bitcoin printers – mining facilities – go brrrr less often.
However, in exchange for guaranteed revenues, this may be an effective hedge for miners against bitcoin’s volatility.
However, in exchange for guaranteed revenues, this may be an effective hedge for miners against bitcoin’s volatility.
Bitcoin and The Environment
Bitcoin mining energy usage is dependent on local energy grids, most mining facilities already use renewable energy sources such as thermal, hydro, wind, and solar.
Bitcoin mining energy usage is dependent on local energy grids, most mining facilities already use renewable energy sources such as thermal, hydro, wind, and solar.
CoinShares estimates a 73% renewables penetration in the bitcoin mining energy mix and that Texas is a prospective region for mining.
Still, Bitcoin will only ever be as clean and environmentally friendly as the grid. Period.
If mining utilizes energy from peaker plants that are turned on only when demand reaches certain levels – then it’s not entirely environmentally friendly.
If mining utilizes energy from peaker plants that are turned on only when demand reaches certain levels – then it’s not entirely environmentally friendly.
Bitcoin is unique, it will continue to consume energy.
There is no upper limit on the price of bitcoin and therefore no limit on how much energy can be dedicated to mining bitcoin. This is the biology of Bitcoin.
There is no upper limit on the price of bitcoin and therefore no limit on how much energy can be dedicated to mining bitcoin. This is the biology of Bitcoin.
The ever – and altruistically – moving goalpost of environmental servitude ensures that Bitcoin will never be without environmental consequences. The hope is Bitcoin’s benefits will outweigh its flaws.
• • •
Missing some Tweet in this thread? You can try to
force a refresh
