Does Solar Change the Calculus on Bitcoin Mining?
We know that solar power can be used to save money on utility bills, but can renewable power help increase profits for your Bitcoin mining operation?
The Bitcoin Profit Equation
Bitcoin is seen by many as the money of the future. This completely digital source of currency has no physical representation and does not operate on the gold standard. Bitcoins are mined from a virtual environment using a series of complex mathematical equations that become more difficult as the number of miners continues to rise.
In order to combat the increasing complexity of mining operations, Bitcoin miners have been forced to upgrade their equipment, utilizing vast supercomputers that come with a hefty price tag. What’s more, as hardware capability rises, so too does the cost of powering the equipment. Energy bills have become a huge drain on Bitcoin profits, eating away at investment returns.
It was estimated that in September 2017, the cost of mining one Bitcoin, based on the national average electricity price of $0.12 per kWh came out to $1,567.88 in energy alone. Costs have grown to such a degree that experts believe, by 2020, the global Bitcoin mining industry will consume enough collective energy to power the country of Denmark.
So, when trying to determine how profitable Bitcoin mining operations are, a simple equation can help you decide if a mining career is worth your time.
Currency Received – Cost of Equipment – Cost of Electricity = Profit
So, let’s examine profitability using this equation.
For this sample scenario we have to assume:
- A Bitcoin difficulty factor of 1590896927258
- A hash rate of 14 TH/s
- BTC Block reward of 12.5
- Exchange Rate of USD to BTC of 10416.67 (As of 1/30/2018)
- Mining pool fees of 2%
- Power consumption of 1,375 W
- Power cost of $0.12 per kWh
- Hardware cost of $2,000
Based on these numbers, you’re receiving a grand total of $677.68, and your electricity costs are $118.80.
So, the equation for profitability would read:
677.68 – 2,000 – 118.80 = -1,441.12
The first month of mining efforts leads to a large deficit, due to the huge chunk of money spent on hardware. If these numbers remained the same, you would start to see a small profit in the fourth month, totaling $235.20. After that, there would be a monthly profit of $558.88, leading to a total yearly profit of $4,706.56 for the entire year.
Solar Changes the Math
Solar power can help Bitcoin miners offset the cost of their electricity bills, saving on one of the largest threats to profitability. Energy costs can have a large effect on the profit equation, so much so that many Bitcoin miners have relocated to areas in which power costs are lower.
The town of Wenatchee Washington is one such place, where a series of hydropower dams along the Columbia River has brought energy costs down as low as $0.02 per kWh. But most Bitcoin miners don’t have the means to just uproot themselves like that. For them, the answer lies in solar power.
Mining operations utilizing a solar farm have been estimated to receive full payback within two years, followed by a 25-year run with ongoing costs equaling next to nothing.
With the added benefit of solar power, a new variable is added to our profitability equation.
Currency Received – Cost of Equipment – Cost of Electricity + Solar Savings = Profit
Let’s add to our earlier scenario, 30 250-Watt solar panels, which produce 900 kWh per month. This provides solar savings of $108 per month.
So now our Equation is:
677.68 – 2,000 – 118.80 + 108 = -1,333.12
While this keeps us at a deficit for the first month, we manage to turn a profit of $1.54 in the third month. This boosts our annual profit to $6,006.16. Solar power saved our hypothetical miner $1,299.60 per year.
Negative Pricing Makes Solar Attractive for Miners
When solar power production exceeds the need for grid-based power, the wholesale price of energy can drop to nothing, or even move into the negatives. This is called negative pricing, and markets in California and Texas have been seeing increased periods of this phenomenon.
Negative pricing gives Bitcoin miners an opportunity to take advantage of sunny daytime hours, in which they can get paid to take negatively priced power while continuing to make their usual profits.
What is Stopping Wide-Scale Adoption?
Despite the potential for profitability, Bitcoin miners have yet to embrace solar power on a large-scale basis.
An Arizona based Bitcoin mining operation called NastyMining is currently running entirely off of sustainable energy sources. Utilizing a large solar system atop their facility, NastyMining has managed to increase their profits by limiting energy consumption.
While the overhead cost associated with solar installation can seem daunting, the potential for future profitability and environmental benefits make it a no-brainer. Government incentives for solar affordability differ state by state but do help in managing upfront costs. (See more on solar costs at PowerScout.com)
To ignore the potential of solar power in the Bitcoin mining industry would be both financially and socially irresponsible. If this is going to be the currency of the future, then power costs will only continue to grow. As the industry speeds forward, it does not need to steamroll over environmental concerns in the process.