Lancium is building bitcoin mines where wind and solar are abundant and the transmission system is constrained, meaning that power wants to flow down the line, but the lines are full.
As Lancium Chief Executive Officer Michael McNamara describes it, these sites act like a large power station but in reverse. The mines will absorb abundant renewable energy at times when supply outpaces demand, thereby monetizing these assets when there are no other buyers. And on the flip side, the mines will incrementally ramp down their energy intake, as demand on the grid rises.
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In a sense, you can almost think of bitcoin miners as temporary buyers keeping these energy assets operational until the grid is able to fully absorb them.
“In times of scarcity, our data centers will go down, and those lines can carry the renewable energy to Houston, Dallas and Austin where they need the energy,” said McNamara.
McNamara tells CNBC the net effect of this is retiring coal and gas faster, while rapidly adding wind and solar at the same time, essentially making bitcoin mining a fundamentally decarbonizing technology.
Bitcoin can also be used to unlock the state’s sequestered deposits of natural gas.
For years, oil and gas companies have struggled with the problem of what to do when they accidentally hit a natural gas formation while drilling for oil. Whereas oil can easily be trucked out to a remote destination, gas delivery requires a pipeline.
If a drilling site is right next door to a pipeline, they chuck the gas in and take whatever cash the buyer on the other end is willing to pay that day. But if it’s 20 miles from a pipeline, things start to get more complicated.
More often than not, the gas well won’t be big enough to warrant the time and expense of building an entirely new pipeline. If a driller can’t immediately find a way to sell the stash of natural gas, most look to dispose of it on site.
One method is to vent it, which releases methane directly into the air – a poor choice for the environment, as its greenhouse effects are shown to be much stronger than carbon dioxide. A more environmentally friendly option is to flare it, which means actually lighting the gas on fire.
But flares are only 75% to 90% efficient, according to Adam Ortolf, who heads up business development in the U.S. for Upstream Data, a company that manufactures and supplies portable mining solutions for oil and gas facilities. “Even with a flare, some of the methane is being vented without being combusted,” he said.
This is when on-site bitcoin mining can prove to be especially impactful.
Ortolf says that when the methane is run into an engine or generator, 100% of the methane is combusted and none of it leaks or vents into the air.
“But nobody will run it through a generator unless they can make money, because generators cost money to acquire and maintain,” he said. “So unless it’s economically sustainable, producers won’t internally combust the gas.”
Bitcoin makes it economically sustainable.
“50% of the natural gas in this country that is flared, is being flared in the Permian right now in West Texas. I think that is an enormous opportunity for bitcoin, because that’s right now energy that is just being wasted,” said Cruz in October.