Movers and SHAKERS
Crypto Mining Gives Mothballed Fossil Fuel Plants New Life
As renewable energy has been replacing the fossil-fuel generated electricity powering communities, bitcoin miners and investors are stepping in to repurpose the older plants. The demand for electricity required to mine bitcoin and other cryptocurrencies and the high return at current prices has made it attractive for miners to restart mothballed plants.
The heat given off by the computers used in mining currencies like Bitcoin makes it logical to set up shop in the higher latitudes where it is naturally cooler. In upstate New York, an idled coal-fired plant has now been converted to natural gas generation and restarted to supply power to Bitcoin mining. Another coal plant in Montana is revamping, fueled by natural gas, to mine cryptocurrency. A once-struggling Montana coal plant is now scaling up to do the same.
Cryptocurrency profitability is driving the move. Bitcoin mining relies on powerful computers solving puzzles; when the puzzle is solved, the reward is a newly minted Bitcoin; as the price of Bitcoin has escalated, the attractiveness of mining has grown. Mining, however, consumes massive amounts of electricity. As mining competition increases, the puzzles get harder. The higher the bitcoin price, the more competition; the more competition, the more power that is needed.
The University of Cambridge Centre for Alternative Finance hosts a website that indexes power consumption for mining Bitcoin. It estimates that the annual power consumption used for mining is 130 terawatt-hours. This is three times higher than their estimates in early 2019. To put it easier to visualize terms, it is a little more power than consumed by Argentina.
In Montana, the coal-fired plant, Hardin Generating Station, had been operating well below capacity for a while. Late last year, a miner called Marathon Digital Holdings Inc. (MARA) partnered with Hardin’s owner to transform the power plant into a hub for mining bitcoin. Marathon Digital’s CEO said, “We were able to get access to a large amount of power at a very attractive price.”
Marathon has plans to scale up to more than 100 megawatts of electricity. The company said that its break-even costs to produce a bitcoin would fall to $4,600, 38% less than current costs by tapping the Montana coal plant. The company aims to produce at least 55 bitcoins daily by the first quarter of next year, up from an average of two a day in 2020. MARA holds nearly $300 million worth of Bitcoin on its balance sheet (subject to price fluctuations), making it interesting to investors looking for crypto exposure but unable to invest directly.
One New York project involves the Greenidge coal-fired power station in the town of Dresden. The inactive plant was purchased in 2014 by a Greenwich, Connecticut private equity company Atlas Holdings. Atlas has since converted the plant to natural gas. Last year, it launched a data center for mining bitcoin using power generated by the plant. The company said it currently has 19 megawatts of mining capacity and plans to raise it to 85 megawatts by the end of 2022.
In March, plans were announced to merge Greenidge with Support.com (SPRT). The deal allows Support.com shareholders to get 8% of the combined company’s shares. Greenidge said it would use the cash on Support.com’s balance sheet to fund its expansion.
Digihost Technology Inc. (HSSHF) began mining in upstate N.Y. in 2015 to take advantage of hydro-generated power from Niagara Falls. The company produces more than 30 bitcoins each month and gets more than 90% of its electricity from hydropower. The price surge in 2021 has prompted Digihost to buy a 60-megawatt natural-gas plant north of Buffalo, N.Y. The initial plans are to direct 35 megawatts toward bitcoin mining while also sending power to the grid when able. Michel Amar, CEO of the company, said they would partly fuel the plant with natural gas derived from animal manure and other sources.
Electricity is critical in solving puzzles to mine Bitcoins. Several companies are finding the solution to their expanding appetite for electricity is to operate their own powerplant. Older plants are being converted to gas-powered and are able to supply the needed power and, at the same time, reduce their costs.
Public companies engaged in Bitcoin mining provide investors with a “back door” way of gaining exposure to price changes of the currency without actually converting dollars to Bitcoin. One creative company has plans to use manure when they can as part of their “greener” method of mining.
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