During the 2021 bull market, numerous large mining companies borrowed significant amounts of money to acquire equipment and infrastructure for cryptocurrency mining. However, the bankruptcy filings of crypto exchanges FTX and Celsius resulted in many of these companies facing financial difficulties. With the current bear market, along with high Bitcoin network hash rates and low profits, there are doubts about whether miners will be able to recover from their losses. Nevertheless, mining companies are now focusing more on alternative energy resources to reduce costs, ensure profitability, and minimize their environmental impact.
One alternative energy source being used by miners is renewable energy. Steven Lubka, managing director for Bitcoin-focused financial services company Swan Bitcoin, stated that mining companies focusing on renewable energy are able to mine a single Bitcoin for between $5,000 and $15,000, compared to the average rate of $26,000. Riot Blockchain, a publicly traded Bitcoin mining company in the US, utilizes wind and solar energy generated in Texas to achieve some of the lowest mining costs. According to a spokesperson for the company, it costs Riot $8,389 to mine one Bitcoin.
Electricity has always been the largest expense for mining operations. Kent Halliburton, president and COO of Sazmining, a hosted Bitcoin mining provider, explained that miners are incentivized to find the lowest-cost power, with renewables often providing excess electricity that is a perfect fit for Bitcoin mining. According to data from the Bitcoin Mining Council, 59% of mining operations are carbon-free and growing at a rate of nearly 4.5% per year. Halliburton added that all of their mining operations in Wisconsin and Paraguay utilize excess hydroelectricity.
A company called OceanBit is integrating Bitcoin mining into its ocean thermal energy power plant design. Michael Bennett, co-founder of OceanBit, believes that Bitcoin is the missing piece needed to scale the ocean thermal energy source to global adoption. Nathaniel Harmon, co-founder and CEO of OceanBit, explained that the cold water produced during the ocean thermal energy conversion process is ideal for cooling mining equipment, while the heat generated by the equipment is ideal for the OTEC process, increasing efficiency and decreasing costs. OceanBit plans to unveil its R&D power plant in Hawaii in 2024.
While some mining companies are using alternative energy sources, it comes with its challenges. Greg Beard, CEO of Stronghold Digital Mining, stated that their company is using coal refuse to power their mining operations, which helps in cleaning up landfills and generating power. However, it also poses environmental concerns. Additionally, misinformation about alternative energy sources and challenges associated with using renewable energy, such as air quality and thermal pollution, may hinder adoption.
Overall, the future of mining operations is likely to rely on renewable energy sources. Mining companies are actively exploring and implementing various methods, such as hydro-cooling technologies, to reduce costs and increase efficiency.