Bitcoin Nuclear Mining at Terawulf Is Just One Piece of the Green Mining Puzzle

A new Bitcoin mining project is set to go live in Northeast Pennsylvania. Terawulf is setting up a nuclear powered mining plant called the Nautilus.

Terawulf first said in 2021 that Nautilus’ fleet of 15,000 mining machines will have a hash rate of 1.6 exhashes per second (EH/s) when it reaches full capacity later in the first quarter of this year.

This is equivalent to 1.6 quintillion hashes per second, or about 0.54% of the current processing power of the entire Bitcoin mining network, which is operating at a speed of 294.09 EH/s.

More importantly though, none of this new mining power will come from fossil fuels, possibly settling a long-standing criticism of the most popular cryptocurrency.

Bitcoin uses a proof-of-work (PoW) mining method to verify transactions and protect the network. Now, miners — computers designed to confirm transactions and earn Bitcoin — consume about 117 terawatt hours a year, or about as much power as a small nation.

As miners continue to roll out improved equipment and even entirely new fleets, this stat doesn’t seem to be going down any time soon.

The hash rate, which measures the amount of processing power needed to mine Bitcoin globally, has risen steadily since 2016.

This chart is being watched by more people than just miners. Regulators are taking notice, too, since about 62% of the energy mix used to power all those devices today comes from fossil fuels.

Just last year, New York State passed a law that prohibits the establishment of any new Bitcoin mining operations within its borders for two years. Similar legislation targeting proof-of-work (PoW) mining was also presented to European parliamentarians, who roundly rejected it.

Nazar Khan, co-founder, CTO and COO of Terawulf, responded to a query by Decrypt publication about whether he was concerned about a government crackdown on PoW-based mining by saying that he hoped they would “consider feedback from people like us. ”

Terawulf Aims to Promote Green Bitcoin Mining

Terawulf billed itself as a “leading sustainable Bitcoin mining company” when it was founded in 2021 by Nazar Khan and Paul Prager, who were senior executives at Beowulf, an energy infrastructure company Prager had founded in 1990.

Khan had already spent more than twenty years creating and running power generation facilities both domestically and internationally when he started learning more about cryptocurrencies in 2017.

In his early days of networking with miners, Khan writes:

As I began to understand how Bitcoin mining worked, it became apparent to me that efficient and cheap Bitcoin mining was highly dependent on infrastructure and the cost of electricity.

In an interview with Decrypt, he said:

Pick a Bitcoin miner’s name and I’ve certainly talked to them at some point, trying to figure out a way to work together. Well I know electricity and I know energy. Let me find someone who knows Bitcoin mining. I quickly saw how low the degree of sophistication was in the area of ​​power, power development and power purchasing.

Khan’s team had already finished building a sizable facility for Marathon, one of the world’s largest mining companies, a year before establishing Terawulf.

Energy company Talen, whose subsidiary Cumulus Data had built a data center next to the parent company’s 2.5-gigawatt Susquehanna nuclear power plant to house Bitcoin mining activities, called after this partnership. Nautilus was created like this.

When Nautilus’ statistics are combined with Terawulf’s planned 3.8 EH/s capacity at its Lake Marina hydroelectric plant in western New York, it becomes clear that the company will have one of the largest Bitcoin mining facilities in the world. world, which runs almost entirely on renewable energy.

However, it involves more than just crypto miners harnessing cheap and clean electricity.

Khan discussed how Talen’s excess renewable electricity can be used reliably by companies like Nautilus and Lake Marina, while also serving as response assets for local power grid operators thanks to Terawulf’s team’s extensive knowledge of infrastructure. energetic.

The term “asset” refers broadly to mining farms that are advantageous to have on a grid and intangible assets to energy providers, which offer high Customer Lifetime Value (CLV) thanks to their advantageous locations that they can keep energy prices low. CLV is the value derived from having consistent and trustworthy customers.

Location, location, location

Beowulf’s parent company, Riesling Power LLC, acquired a shuttered coal plant in Somerset, on the western border of New York state, in 2016.

Plans for new coal plants around the world were cut by 76% as a result of the Paris Agreement, which had been signed in New York City the previous year. The group realized that they were effectively buying the facility in order to shut it down.

Using a network of transmission lines, those thick cables you see supported by huge towers along international highways, the facility was connected to the state grid. Transmission lines were installed to transfer 700 megawatts of power from the plant to the grid when it was operational.

Khan realized that Terawulf could easily bring 700 megawatts of power to the site to power a fleet of Bitcoin miners due to his professional knowledge of energy infrastructure.

Khan then began looking at power for the site and discovered that the local grid zone (Zone A), which is overseen by a non-profit organization known as the New York Independent System Operator (NYISO), produces “about four to five gigawatts.” ” of energy using mainly renewable sources, such as hydroelectric power.

Terawulf’s first Bitcoin mine, Lake Marina, was operational in March 2022.

Local demand only uses “one gig or one and a half gig” of those five gigawatts, leaving more than three gigawatts of surplus generation to be carried by transmission lines across the state, primarily to meet the Big Apple’s power needs. also known as the “cargo pocket of New York City” in the energy industry.

For mining operations to run effectively, local energy demands must be understood. Massive electricity loads placed in high-demand locations will likely lead to higher costs than they are now.

Khan said: “One of the most effective and affordable charge drains out there is bitcoin mining. We are placing our loads in areas with high power supply and low demand so that we can operate as a “sink” to absorb power at competitive costs and provide a means to sell electricity in areas where there are typically few buyers.

Location is crucial, but for renewable energy even more so. Hydroelectric and nuclear power plants never stop producing electricity, and these facilities can sometimes keep running for years.

However, having too much power can be dangerous to a system in the same way that not having enough power can result in rolling blackouts, as was the case in Texas last year.

Herein lies another potential benefit of strategically located mining companies.

When there is a large supply of power or a strong demand for it, they may quickly shut down machinery or draw additional power from a grid.

Network operators are amazed

According to Khan, the network only meets peak demand for 50 to 100 hours a year despite being built to do so plus a buffer.

Terawulf mines, and Bitcoin mines in general, can drop their demand in seconds if the grid gets too hot, but that’s not usually a concern for a mining farm sucking up a lot of renewable energy in a low-lying location. demand.

This is possible thanks to a mechanism available to grid operators called Automatic Generation Control (ACG). To maintain a balance between local production (the amount of power generated) and the local electrical load on a specific section of the grid, ACG modifies the output of generators at various power facilities (the power consumed).

According to Khan, if a grid operator needs to add 15 or 25 megawatts to a region where charging is restricted, it will notify a power plant in a region with additional capacity to shut down. In other words, when operators need to increase generation at one location, they must decrease it elsewhere.

ACG’s typical reaction time is 15 minutes, so it takes a quarter of an hour from the moment the network operators deliver the signal to the plant until the plant reaches its satisfactory level.

The response time for bitcoin mining is closer to fifteen seconds.

When they consider it, “the minds (of network operators) are a little blown,” Khan said. We have a load that responds by 10, 20, 50, or 100 megawatts in less than a minute, and you can ramp it up in the same amount of time. When operators learn how responsive we can be, they fall in love with it, because that level of responsiveness is unheard of.

A typical top of the line Application Specific Integrated Circuit (ASIC) or mining machine can shut down in less than a minute, making even a fleet of them more responsive than a nuclear plant. This fast reaction time is the result of this.

The response capacity of the electrical load is not affected if the shutdown signal is programmed one day in advance or in real time. With most industrial scale loads, this is not the case.

When viewed in this light, miners like Terawulf become less of a pioneer of environmentally friendly cryptocurrency mining and more of a tool for network administrators to use to maintain a delicate balance between supply and demand. demand.

When there is a power surplus, miners can quickly adjust their needs by absorbing it or shutting down their equipment when there is a higher demand elsewhere.

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