Square - Bitcoin Clean Energy Initiative

Apr 21, 2021 4 min read
Square - Bitcoin Clean Energy Initiative

"In this memo, we aim to explain how the Bitcoin network functions as a unique energy buyer that could enable society to deploy substantially more solar and wind generation capacity."

Introduction

Mine

Square, in cooperation with ARK Invest, has published a fantastic memo outlining the roadmap for how Bitcoin mining will accelerate the buildout of clean energy. This idea is not novel, but the clarity with which they outline the process is a big improvement and makes this mandatory reading for anyone interested in knowing more about Bitcoin and its relationship to energy.

Square Tweet
ARK Tweet

Theirs

Bitcoin is Key to an Abundant, Clean Energy Future

In this memo, we aim to explain how the Bitcoin network functions as a unique energy buyer that could enable society to deploy substantially more solar and wind generation capacity. This deployment, along with energy storage, aims to facilitate the transition to a cleaner and more resilient electricity grid. We believe that the energy asset owners of today can become the essential bitcoin miners of tomorrow.

Commentary

Bitcoins energy use has been long misunderstood. This report does a great job at showing how Bitcoin mining will incentivize and enable increased deployment of renewable energy. Bitcoin is "the energy buyer of last resort," which uniquely positions Bitcoin mining as an industry driving the construction of renewable energy generation facilities. This is because Bitcoin minings energy needs are:

  • Location agnostic (requires only internet connection)
  • Highly Flexible (interruptible load)

All About The Peaks

The trickiest thing about power generation is that we build out capacity with peak demand in mind. But this ends up leaving us with a ton of unused capacity most of the time, which creates roadblocks when it comes to financing said projects.

Bitcoin mining provides an outlet for unitized capacity and stranded energy. This might not matter as much when it comes to non-renewables. In the case of coal, you simply stop burning coal, you reduce your consumption of the raw material. But when it comes to renewables, like wind, there is no impact to the environment to "over-consuming." Such that a wind farm operator would love to harvest the maximum amount of energy available to them, so long as they have a buyer for the surplus they produce. No sense in harvesting energy you cannot sell.

This is where Bitcoin mining comes into the picture. The wind farm can let the windmills keep on turning, harvesting surplus energy and sell all of the surplus energy generated to Bitcoin miners. This is incredibly important, because it means that the wind farm that might only be able to sell 12 (of its theoretical 24 hours) to the community it services can now sell the other 12 hours of energy produced to the Bitcoin Network.

That's incredible because of the impact that has on the economics of renewable energy projects going forward. Projects that might not otherwise make financial sense, because the economics of the project don't make sense, can now be undertaken, all because of Bitcoin, as the buyer of last resort.

This results in more renewable energy generation facilities being built today. Facilities that will stand ready to service the future demand of human beings and industry. Bitcoin mining serves

The Whole Report

PDF

Images

Conclusion

Mine

I think this memo will come to be seen as the pivot point when it comes to the energy debate. For a while, the truth has been that Bitcoins energy usage incentivizes construction of renewable energy. And yet, for a while, the hot take, in the popular consciousness has been that, bitcoin is boiling the oceans. Now that Square and ARK (two of the best brands on earth at the present moment) have put together a slick, easy-to-digest deck explaining why Bitcoin is good for the adoption of renewable energy.

Theirs

Bitcoin miners, on the other hand, are an ideal complementary technology for renewables and storage. Combining generation with both storage and miners presents a better overall value proposition than building generation and storage alone.

We believe there are two large implications if bitcoin mining becomes normalized as an energy buyer of last resort. First, the amount of solar and wind energy on the grid cold increase dramatically.
[...]
The second major potential impact could be a sizable transformation and greening of the bitcoin mining industry.

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