As part of my continued mini-series on why bitcoin is an energy solution, not an energy problem, I will be focusing on how mining bitcoin with solar energy is one of the best options for bitcoin miners to both generate more bitcoin while helping to solve one of the energy sector’s biggest problems.
What Is Solar Energy?
Solar energy is radiant energy that comes from the sun. It is the source of all life on planet earth. Without solar energy, grass could not grow, animals could not graze, our entire ecosystem would collapse, and life on our planet would come to an end.
Solar energy is incredibly powerful which is why humans have learned how to harness it to advance civilization.
Harnessing Solar Energy
Each and every day the earth receives more energy than it knows what to do with from the largest energy source known to humankind. I am talking about our star, the sun.
According to a tweet by Jameson Lopp, the amount of energy that is consumed by all of humanity each year is about 600 Exajoules which is approximately all of the solar energy that hits the earth’s surface every 2 hours.
If humans could harness the power of all of the sunlight that hits the earth’s surface in just 2 hours, we could fulfill all of the current energy needs of the human race for an entire year. That’s an awful lot of energy that goes unharnessed.
So, how do we harness solar energy to generate electricity?
Currently, we use two basic methods; photovoltaic and concentrated solar.
Photovoltaic Solar Panels
Photovoltaic (PV) solar panels are what you’re most likely to see in urban environments. These are panels that are often on the roofs of homes, businesses, schools, or maybe in a field all by themselves.
When sunlight hits these panels, they convert the sun’s radiant energy into electricity which is then utilized to power our daily lives.
Since the roofs of most houses are unused, PV solar panels tend to be the best option in the city where land space is limited, the need for electricity is greatest, and there’s less need to transport it over great distances to consume it.
Some parts of the world get a LOT of sunlight throughout the year and have little to no other natural resources. In these desert landscapes, we are starting to utilize a different method to harvest solar energy known as concentrated solar power.
Concentrated Solar Power
Concentrated solar power (CSP) farms function differently than PV solar panels. Instead of panels that convert the sun’s energy directly into electricity, large plots of land are filled with reflective mirrors that concentrate solar energy towards a single point. This concentrated energy is used to heat up a liquid, create steam, and spin a turbine to produce electricity. If you have ever driven to California from Las Vegas, you have probably seen the Ivanpah Solar Power Facility near I-15.
One of the drawbacks of concentrated solar farms is that they require large amounts of land and are often located in the desert far away from where people live. Once electricity is produced by CSP, it has to be transported over great distances with power lines or stored so it can be used later. Currently, neither option is economically viable at scale.
Energy producers either need a way to transport electricity to towns/cities where it’s consumed or store it in some sort of battery. Both methods come with their own set of costs and drawbacks.
Transporting electricity (powerlines) costs money, takes time to build/route, and loses a percentage of electricity for every 100 miles that it spans.
There are also ways to store energy using methods like molten salt, kinetic flywheels, hydro pump storage, large battery banks, and other storage methods being experimented with.
If neither one of these options are immediately available, the energy gets wasted through a process called energy curtailment.
Solar Energy Curtailment
The biggest hurdle with solar electricity is that it is only generated during the day when the sun is shining and demand for electricity is at one of its daily low points. This gap between the supply and demand of fresh solar electricity means that energy producers are often faced with the problem of too much energy.
In the energy sector, this problem is often called “too much of a good thing”. While it is definitely a good problem to have, it’s still a problem.
To deal with this excess in supply, energy producers are forced to reduce the supply they put on the grid even if they are perfectly capable of producing at full capacity. This cutback in production is energy curtailment.
You might ask yourself, “Why don’t we just store the electricity in a big battery so we can use it later?” and that’s a great question.
So, how can we store surplus energy on a massive scale? With strategic placement within the grid, bitcoin mining eliminates the need for energy curtailment by “selling” all surplus electricity to bitcoin miners.
Storing Surplus Solar Energy
With many governments around the world subsidizing solar power production, there has been a massive influx of new solar energy that has come onto the power grid in the past decade.
The problem is that energy storage solutions can’t keep up with the amount of electricity that is being put onto the grid because billions of tax dollars are being injected into solar energy production without a way to store all of that energy.
Scientists, engineers, businesses, and governments around the world are all working to develop efficient means of storing massive amounts of electricity but they are all capital intensive (expensive), take time to build, and result in a certain amount of lost energy over time.
This is where mining bitcoin with solar energy provides a solution to all of these problems at the same time. In order to store all of this surplus energy so that it can be put to use at a later time and location, bitcoin can function like a digital battery and use all surplus electricity to mine bitcoin. When needed, it can be sold or used to pay for more infrastructure or more efficient hardware.
Can You Use Solar Energy To Mine Bitcoin?
With the problem of having too much solar power without an efficient means to store it, there’s an amazing opportunity for bitcoin miners. Since curtailed energy is completely wasted, it results in a loss of capital for the energy producer and is ultimately a net loss for all of society. After all, the purpose of generating electricity is to use it, not waste it.
Bitcoin mining eliminates the need for energy curtailment by always offering a “lowest bid” price for all unused energy. Whenever a solar producer needs to curtail their production, bitcoin miners can be ramped up to convert surplus energy into bitcoin which can be sold off at an exchange or held on a balance sheet for future investment.
Turning energy waste into bitcoin in this manner effectively means that solar energy producers are getting free bitcoin.
”Free” Electricity
We get energy from the sun at no cost. As I mentioned earlier, there is literally so much solar energy that hits the earth’s surface every day that we wouldn’t know what to do with it if we could harness even 10% of it.
Naturally, there is no such thing as “free energy” because it requires an immense amount of capital and labor to produce solar panels and concentrated solar plants but mining bitcoin with surplus energy is as close to “free” as you can get. It also enables these energy producers to subsidize their costs and potentially finance further innovations in the energy sector.
Bitcoin Mining Subsidizes Solar Energy Production & Storage
Building solar panels and concentrated solar farms is expensive. Most concentrated solar farms cost hundreds of millions of dollars to build and PV panels still have a ways to go before they are economically viable for hundreds of millions -or billions- of people.
In order to build these sorts of facilities, it requires substantial capital investments from private firms as well as government energy subsidies. Once these facilities have been built, they can’t afford to lose money so they either need a buyer for every joule of electricity that they produce or a way to store it for later use.
In the event that production facility owners want to invest in their own energy storage systems such as molten salt, kinetic flywheels, or lithium battery banks (like Tesla’s experiment in Australia), they will need even MORE money.
Shipping containers filled with bitcoin miners can be easily deployed to convert energy waste into bitcoin. This capital can be invested into the energy storage systems I’ve just mentioned above effectively subsidizing initial capital costs and even long-term operating costs.
Final Thoughts
We all enjoy using electricity. It powers our homes, offices, subways, computers, universities, ovens, the phone that you might be reading this article on, and of course, Bitcoin mining.
Whether or not you believe in the long-term viability of solar electricity, the sun is essentially an infinite supply of energy in relation to global energy demand. Unfortunately, due to the disproportionate increase in the supply of solar-electric generation (largely due to government subsidies), energy curtailment is likely to increase until there is an effective way to store surplus solar energy so it can be used after the sun goes down.
Until energy storage solutions are viable at scale, bitcoin mining is the solution to the problems facing solar energy production and storage.
Mining bitcoin with solar energy eliminates the need for curtailment by reducing grid congestion and providing energy suppliers with a buyer of last resort for all surplus energy. It enables a place to store energy as a sort of “financial battery” that can be used to subsidize the costs of physical energy storage as well as building a more efficient energy grid.
The next time you see a solar farm, you might consider whether or not they have an effective means of consuming or storing all of the energy it’s producing. If not, bitcoin mining is the solution.
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